Samsung Profits And Revenues Feel The Pain From Galaxy Note 7 Fallout

The true cost of Galaxy Note 7 fiasco to Samsung’s bottom line has been starkly illustrated in its latest financial results, which show a 30 percent fall in operating profit as well as an equally painful fall in revenue.

Samsung reported that for its third quarter, it made a total operating profit of 5.2 trillion Korean won (£3.7bn), down from 7.39 trillion Won (£5.27bn) in the same year ago quarter. There was also bad news of the revenue front, after sales fell to 47.82 trillion Won (£34bn), down from 51.68 trillion Won (£37bn) a year earlier.

Looking at all the business units that make up Samsung Electronics, its semiconductor business experienced growth thanks to strong demand for memory chips, and there was increased shipments for its large LCD TV panels.

READ MORE: The story of the failed Samsung Galaxy Note 7

Financial Pain

But it was the mobile division that weighed on Samsung’s overall results, after the IM division posted 0.10 trillion Korean Won (£717m) in operating profit and 22.54 trillion (£16bn) in consolidated revenue and for the quarter.

“The Mobile business saw its earnings decrease significantly QOQ due to the effects of the discontinuation of the Galaxy Note7,” admitted the firm. “However, smartphone shipments remained solid due to continued stable sales of its existing flagship devices, including the Galaxy S7 and S7 edge, and steady growth in the mid-tier Galaxy A and J series.”

Looking ahead to the fourth quarter, Samsung forecast that smartphone and tablet demand would increase during the peak holiday season.

“The company will strive to achieve comparable YOY earnings in the fourth quarter, helped by solid sales of the Galaxy S7 and S7 edge, while maintaining profitability in the mid-to-low end segment through increased shipments of new models,” it said.

Samsung also said that new flagship smartphones launched in 2017 will also help turn things around.

“Next year will also see expansion of Samsung Pay rollouts and cloud-related services as well as the introduction of artificial intelligence related offerings,” it said.

Samsung is not alone in struggling with smartphones. Earlier this week its bitter smartphone rival Apple, reported falling sales and revenue for the first time since 2001.

Galaxy Note

There is little doubt that Samsung’s reputation took a hit after reports began emerging that a number of Galaxy Note 7 devices, which had only been launched in August, had caught fire.

As incidents of battery fires increased, Samsung issued a recall for the devices.

Samsung assured owners that it had identified the problem and began replacing handsets with new units that supposedly sorted the problem. But when replacement devices also started to ignite, Samsung was decided to permanently discontinue the Note 7.

That said, Samsung is pressing ahead with the development of its other major smartphone, the Galaxy Note 8, for release early next year.

Quiz: What do you know about the smartphones of 2016?