Samsung’s third quarter results show the Galaxy Note 7 eviscerated mobile division’s profit

Samsung’s earnings guidance prior to the Galaxy Note 7’s demise suggested that the company would carry the momentum forward from its record-breaking second quarter as the new flagship looked poised for success. Then the Galaxy Note 7 had to be discontinued and Samsung later had to revise its guidance to show an immediate impact of about $2.3 billion. Samsung today released its full third quarter earnings and we now get a clear picture of just how devastating the Galaxy Note 7 has been for the company’s operating profit.

In line with its earnings guidance, Samsung’s revenue for the third quarter ended September 30 2016 was KRW 47.82 trillion ($41.9 billion). a 7.5 percent decline of about KRW 3.87 trillion ($3.4 billion). The company today posted its worst operating profit in two years. Samsung Electronics posted KRW 5.2 trillion ($4.5 billion) in operating profit which is a decline of 30 percent year-over-year.

Samsung says that its components business saw increased operating profit quarter-over-quarter because of expanded sales of high-end products like flexible OLED panels and SSDs but also saw a marginal year-over-year decline due to price correction for DRAM in the first half of this year. Strong sales of SUHD TVs and premium home appliances provided solid growth in earnings.

The true impact of the Galaxy Note 7’s discontinuation is evident in the operating profit posted by Samsung’s mobile division. It posted an operating profit of only KRW 100 billion ($87.8 million), a staggering decline of 95 percent and the lowest it has posted in almost eight years. Samsung says that its mobile business saw earnings decrease significantly due to the effects of the Galaxy Note 7’s discontinuation but points out that shipments remained solid due to “continued stable sales” of the Galaxy S7 and the Galaxy S7 edge, it also saw steady growth in the mid-range segment with the Galaxy A and Galaxy J series.


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