Galaxy Note 7 Debacle Sends Samsung Operating Profits Down 30%

Samsung's profits are taking a beating in the wake of the Galaxy Note 7 recall and cancellation. The smartphone was originally recalled due to multiple fires when the devices overheated while charging. Replacement devices were then sent out that suffered from the same issue eventually leading to the entire Note 7 line being recalled again and cancelled. In the wake of this debacle, operating profits at Samsung between July and September have plunged 30% compared to last year.

Profits in this July to September quarter fell to $4.6 billion, the lowest level in two years for Samsung. At least the company is still in the black, predictions are that cleaning up the Galaxy Note 7 mess will cost Samsung billions. Shareholders in Samsung are now backing Lee Jae-yong to join the board of the company, presumably the next head of the family-run company. Lee Jae-yong is the grandson of Samsung founder Lee Byung-chull and the son of current chairman Lee Kun-hee.

There are detractors to the placement of Lee on the board because some see his rise as birthright rather than merit. Lee hasn't held any major position at Samsung in the past according to critics. However, Lee is currently vice chairman of Samsung Electronics and he is widely expected to take over control of Samsung when his father steps down. Samsung doesn't have a major smartphone launch coming until 2017 when the Galaxy S8 launches.

"Samsung has lost consumer confidence, but I think it still has at least one more chance. Rather than rushing to release the next product, it should conduct a thorough inspection and explain the results of its investigation into the Note 7," said Greg Roh, an analyst at HMC Investment Securities.

SOURCE: BBC