Samsung sees further $3B profit hit from Note 7 crisis

SEOUL - Samsung on Friday said the crisis over its exploding Note 7 smartphones would cost another $3 billion-plus in lost profit over the next two quarters, but hoped expanded sales of its other flagship handset would help cushion the impact.

The profit warning came two days after the South Korean electronics giant slashed its operating profit for the third quarter by $2.3 billion.

After a recall problem with the large-sized Galaxy Note 7 turned into a full-blown crisis, Samsung announced earlier this week that it was scrapping the model entirely -- a devastating move for a company that prides itself on the quality production of cutting-edge technology.

On top of the third-quarter loss, Samsung said the drop in sales arising from the decision to discontinue the Note 7 would continue to impact profit margins during the October-March period -- including the crucial holiday buying season.

It estimated operating profit loss in the fourth quarter at around the "mid-2 trillion ($2.2 billion) won range" and 1.0 trillion won for the first quarter of 2017.

"Moving forward, Samsung Electronics plans to normalize its mobile business by expanding sales of flagship models such as the Galaxy S7 and Galaxy S7 edge," the company said in a statement.

Samsung announced a recall of 2.5 million units of the oversized Galaxy Note 7 smartphone in early September after several devices exploded or caught fire.

When replacement phones also started to combust, the company eventually decided to kill off the Note 7 for good.

The company blamed faulty batteries made by an unnamed supplier -- widely believed to be its sister company Samsung SDI.

But numerous experts and analysts said the problem may have been with the handset's underlying technology, and Samsung's decision to rush the launch of the smartphone ahead of the latest iPhone from arch-rival Apple.

In its statement, Samsung vowed to "focus on enhancing product safety for consumers by making significant changes in its quality assurance processes."

Industry analysts have suggested the Note 7 fiasco could end up costing Samsung anywhere between $10 billion and $20 billion, with a lot of the losses tied up with the harder-to-calculate damage done to brand reputation.

"And this figure doesn't take into account the huge marketing costs for Samsung to win back customer loyalty and to regain the trust of mobile carriers," said Greg Roh, an analyst at HMC Investment Securities

"It will have to spend a lot of money to recover and much work has to be done," Roh said.

The stock market, which has largely factored in the inevitable profit hit Samsung will be forced to take, reacted calmly to Friday's announcement.

Samsung's share price dropped 0.4 percent at the opening bell, but then recovered to move into positive territory, up 0.5 percent.

source: www.abs-cbnnews.com

Samsung sends fireproof packaging and gloves for Note 7 returns

NEW YORK - Samsung Electronics Co. Ltd. said it was sending fireproof packaging and gloves to customers who bought the Galaxy Note 7 phone on its website, so they could safely return the devices after a recall and reports that some replacement phones went up in flames.

"A device containing a lithium ion battery subject to a recall must be shipped in accordance with government regulations, and these special boxes are required by government regulations," the South Korean phonemaker said in a statement on Wednesday.

The company, which permanently halted production of its flagship Galaxy Note 7 smartphone on Tuesday, said it was also scheduling appointments with Note 7 users to pick-up the affected device.

Samsung halted production of the phone less than two months after its launch, following reports that in some instances their batteries caught fire. Its decision to scrap the device after a recall of 2.5 million units last month was a blow to its brand image and financial outlook.

A YouTube video by Android developer news site XDA Developers, which said it received a "return kit" and instructions from Samsung, showed a fireproof box that is "forbidden for transport by aircraft" and gloves to handle the device. The thermally insulated outer box that has ceramic fiber paper lining has two smaller boxes within it and a static shielding bag, the video showed.

In the United States, customers should use the US Postal Service and UPS shipping services to return their Note 7 devices in the fireproof box, according to a Samsung customer care representative.

A US-based Samsung spokesperson could not be immediately reached to provide further details on the Note 7 return kits.

The US Postal Service is only shipping Note 7 devices through its ground transportation service, as required by its rules on transporting damaged or recalled lithium ion batteries, a spokeswoman said.

UPS and Fedex did not immediately respond to requests for comment.

Royal Mail Plc, operator of Britain's main postal service, said on Wednesday it had banned the delivery Note 7 smartphones through its network for safety reasons, making it potentially difficult for many Britons to return the recalled devices.

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Samsung offers exchange, full refund for Note 7 in Philippines

MANILA - Samsung Philippines on Wednesday urged Galaxy Note 7 owners in the Philippines to power down their devices and exchange them for a different model or get a full refund.

The South Korean electronics giant has halted production of the flagship smartphone after replacement units that followed a global recall were found to overheat and catch fire like the original models.

If customers opt to get the S7 Edge, Samsung said it would reimburse the price difference with the more expensive Note 7.

Samsung advised customers to transact in the store where they bought their phones.

Note 7 owners can also contact Samsung customer care at +63 (2) 422-2111 or visit their website at http://www.samsung.com/ph/note7exchange.

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Samsung Note 7 stumble opens opportunity for Apple, Huawei

PARIS - Smartphone customers losing faith in Samsung have plenty of choice at a time when Apple, Google and China's Huawei are each pushing new models that up the features ante and do not self-combust.

"All of Samsung's competitors are rubbing their hands in glee," said Thomas Husson, an analyst with the Forrester technology research and consultancy firm.

"It's basically a good product, released at the right time, but a slip-up, and we've seen in the past with Nokia or Blackberry that these can have disastrous effects," he added.

While it is too early to predict a similar disappearance from the phone market of the South Korean company, rivals are nipping at the heels of the market leader.

These include not only Apple and Chinese companies like Huawei, but also internet titan Google, which entered the smartphone market last week with its own device -- the Pixel.

"There will inevitably be some moderate-to-marginal benefit for Samsung’s handset rivals, more particularly Apple, perhaps faster-growing Huawei can benefit more from Samsung’s Note 7 travails," said analyst Ken Odeluga at the online trading firm City Index.

APPLE AND HUAWEI

However Ian Fogg, senior director and head of the mobile and telecoms team at the IHS technology consultancy, said that "Huawei will be the biggest beneficiary from brand damage to Samsung."

One of the largest providers of network infrastructure globally, Huawei has been pushing into the smartphone market, including the top-end segment with its P9 model that features a camera with two Leica lenses.

"Huawei will look to pick up sales right across its portfolio," said Fogg, noting that Huawei was already the third-largest smartphone maker.

"Like Samsung, it uses Android and offers smartphones at a wide range of prices."

The blow to Samsung is unlikely to be fatal, however.

"Competitors might enjoy a short-term boost to sales as a result of a major player having to withdraw its new model, though overall it is likely to remain a competitive market," said Laith Khalaf, an analyst at Hargreaves Lansdown brokerage.

Part of the reason is that its competitors have their own challenges to surmount.

Huawei, for instance, still needs to build its brand in Europe and North America.

Meanwhile Apple needs to recapture the excitement around its products that has disappeared in recent years.

TIP OF THE ICEBERG?

Thomas Husson at Forrester believes "it is too early to say what the long-term impact will be" from this incident, although the recall is likely to set it back a considerable amount.

Linda Sui, wireless smartphone strategies director at Strategy Analytics, estimated that Samsung could lose "$10 billion or more" over the recall.

"The loss of sales from the Galaxy Note is only the tip of the iceberg," warned CMCMarkets analyst Jasper Lawler.

"Demand for the flagship Galaxy S8, scheduled for release early next year, could be severely impeded by the loss of consumer confidence in the Samsung brand."

But City Index's Ken Odeluga said that "nobody wants to believe Samsung has ‘lost its touch’ at producing beautiful and advanced consumer technology."

"So there is some underlying sentiment that views its problems as the kind of bad luck which could afflict almost any smartphone maker that is pushing boundaries."

But ManMohan Sodhi, a professor of operations and supply chain management at Cass Business School in London believes that it wasn't bad luck as much as bad judgement.

"They should have figured out the product but with Google coming out with the Pixel, they did not give it enough time," said Sodhi.

While Google has developed the Android operating system that powers the smartphones made by Samsung and other manufacturers, except for Apple, it has generally stayed on the sidelines when it comes to handsets.

The release of the Pixel, along with its Google Home virtual assistant, indicates that Google aims to get its artificial intelligence technology into the hands and homes of consumers.

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Samsung halts sale and exchange of Note 7

SEOUL - Samsung Electronics on Tuesday called a worldwide halt to the sale and exchange of its Galaxy Note 7 smartphone, citing continued safety concerns, and advised all customers to stop using the device immediately.

The dramatic warning came in a written statement issued a little over a month after the world's largest smartphone maker announced a global recall of 2.5 million Note 7s in 10 markets following complaints that its lithium-ion battery exploded while charging.

The unprecedented recall was a major PR blow for the South Korean conglomerate which prides itself on innovation and quality, and the situation only worsened when reports emerged a week ago of replacement phones also catching fire.

Tuesday's statement was the first formal acknowledgement of continued safety concerns and came a day after Samsung acknowledged it was easing production of the flagship smartphone.

"Because consumers' safety remains our top priority, Samsung will ask all carrier and retail partners globally to stop sales and exchanges of the Galaxy Note 7 while an investigation is taking place," the statement said.

Analysts noted that the move came a little late given that a number of major distributors -- US telecom firm AT&T and German rival T-Mobile -- unilaterally announced a halt to sales and exchanges of the model on Sunday.

Samsung said its investigation of the "recently reported cases" involving the Note 7 was being carried out in cooperation with the relevant regulatory bodies in those markets where the recall was ordered.

In the meantime, the company advised any consumer with an original or replacement Galaxy Note 7 to "power down and stop using the device" immediately.

Analysts have suggested that Samsung, battling ever-fiercer competition in the saturated smartphone market, may have rushed production of the Note 7 with bitter rival Apple's recently released iPhone 7 in mind.

The top-of-the-line Note 7 was crucial to Samsung's growth plans this year, with the company struggling to boost sales, squeezed by Apple in the high-end sector and Chinese rivals in the low-end market, as profit has stagnated.

The trouble with the Note 7 and the handling of the recall, which analysts say could cost up to $2.0 billion, has shone a spotlight on Samsung's management at a time when it is navigating a tricky generational power transfer within its founding Lee family.

Industry experts have criticised the Lee dynasty for controlling the vast group through a complex web of cross-shareholdings, even though they directly own only about five percent of total stocks.

And Samsung is also under pressure from one of its shareholders, the activist US hedge fund Elliott Management run by billionaire Paul Singer.

In a detailed proposal unveiled last week, Elliott laid out a strategy for streamlining Samsung, splitting the company in two, dual-listing the resulting operating company on a US exchange and paying shareholders a special dividend of 30 trillion won ($27 billion).

Elliott argued that Samsung, currently a maze of listed and unlisted companies with a notoriously opaque ownership and management structure, had suffered from a long-term undervaluation in the equity market.

Despite all its problems, Samsung on Friday issued a stronger-than-expected operating profit forecast for the third quarter, thanks largely to strong sales of memory chips and OLED display panels.

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Samsung recall crisis deepens; Yonhap reports Note 7 production halt

SEOUL, Oct 10 (Reuters) - Samsung Electronics Co Ltd has suspended production of its Galaxy Note 7 smartphones following reports of fires in replacement devices, South Korean media said on Monday, a further setback for the tech giant trying to manage its worst ever phone recall crisis.



Samsung's decision to temporarily halt Note 7 production was done in cooperation with authorities in China and the United States, as two U.S. carriers have stopped exchanging or selling new Note 7 phones, Yonhap News Agency cited an unnamed source at a Samsung partner firm as saying.

Samsung did not immediately comment on the Yonhap report.

Problems with replacements for the Note 7 model would create a new and potentially costly chapter to a global scandal which has hurt the reputation of the world's biggest smartphone maker. It also could add new dangers for consumers.

AT&T Inc, the No.2 U.S. wireless carrier, said on Sunday it will stop exchanging new Note 7 smartphones due to reports of fires from replacement devices that Samsung has said used safe batteries.

No.3 wireless carrier T-Mobile US Inc said it was temporarily halting sales of new Note 7s as well as exchanges while Samsung investigated "multiple reports of issues" with its flagship device.

T-Mobile offered customers who brought in their Note 7s a $25 credit on their phone bill.

Samsung announced on Sept. 2 a global recall of 2.5 million Note 7s in 10 markets including the United States due to faulty batteries causing some of the phones to catch fire.

A Southwest Airline flight was evacuated earlier this week after a replacement model Note 7 smartphone began smoking inside the plane, according to the family who owns the phone.

Samsung earlier said it was investigating reports of "heat damage issues" and would share its findings when the investigation is complete.

"If we determine a product safety issue exists, Samsung will take immediate steps approved by the CPSC (U.S. Consumer Product Safety Commission) to resolve the situation," Samsung told Reuters in a statement.

Samsung shares were down 3.3 percent as of 0125 GMT, compared with a 0.1 percent fall for the broader market.

"I thought the Note 7 matter was coming to an end, but it's becoming an issue again," Alpha Asset Management fund manager CJ Heo said.

Samsung should be able to recover from the short-term reputational damage of the recalls, but fourth-quarter sales of the Note 7 would be hurt, he added.

South Korea's largest mobile carrier, SK Telecom , said it was closely monitoring the situation and would not comment further. KT Corp, the No.2 South Korean carrier, said it had taken no steps in regards to sales or exchange of new Note 7s.

(Additional reporting by Parikshit Mishra in Bengaluru and Nataly Pak in Seoul. Writing by Lincoln Feast; Editing by Miyoung Kim; and Stephen Coates)

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Samsung considers Galaxy Note 7 recall: source

SEOUL - Tech giant Samsung Electronics Co. Ltd. is considering a recall of its new flagship Galaxy Note 7 devices amid reports that some of the premium phones are catching fire due to battery problems, a person familiar with the matter said on Friday.

The person, who declined to be identified as the deliberations were not yet finalized, told Reuters the firm had not decided specifics such as the timeline for a potential recall or how many phones could be affected.

Samsung declined to comment on any recall plan for the high-end gadget, which has been the subject of online complaints from users claiming their phones had caught fire while charging.

While analysts expect the Note 7 problems to be resolved quickly, ongoing major problems could derail Samsung's mobile recovery after a string of product successes had reversed the smartphone leader's declining market share.

The South Korean firm has pinned its hopes on the Note 7 to maintain strong sales momentum in the second half against stiffening competition from the likes of Apple Inc, which is expected to release its latest iPhone next week.

"They need to nip it in the bud right now. The last thing they want is for memes to be spreading on the internet associating the Samsung name with an exploding battery or injury," IDC analyst Bryan Ma said.

On Wednesday Samsung said it had halted supply of the new phone to the top three South Korean carriers and that shipments were being delayed as it conducted additional quality testing.

It did not elaborate on any problems it may have found with the gadget, which was launched in South Korea and other markets on Aug. 19 and has been generally well-received by critics.

Investors stripped about $7 billion off Samsung Electronics' market value in response to the shipment delays on Thursday, but sentiment appeared to have recovered in Friday trading. The shares were up 0.3 percent compared with a 0.1 percent rise for the broader market.

SHIPPING DELAYS

South Korea's Yonhap News Agency reported separately that Samsung Electronics had pushed back the Note 7's launch in key European markets such as Britain and France. Shipments to the United States appear to have halted as well, Yonhap said, without citing a direct source.

Samsung said in a statement to Reuters it was "conducting a thorough inspection" with its partners on the Note 7 and would share its findings as soon as possible. The company did not immediately comment on Yonhap's report.

Credit Suisse said a recall or major shipping delays could wipe 1.5 trillion won ($1.34 billion) off the firm's 2016 operating profit estimate of 30.2 trillion won.

But the brokerage said this was the "absolute worst case" scenario and was unlikely to materialize, as it expected the firm to resolve issues with the phone before the fourth quarter.

Hyundai Securities also said in a report released on Thursday that the Galaxy Note 7's problems should be resolved within a "few weeks". The brokerage retained its third-quarter operating profit forecast of 8.5 trillion won.

source: www.abs-cbnnews.com