Samsung profit plunges 30% after Note7 fiasco
Net income dropped to 4.54 trillion won in the third quarter from 5.46 trillion won a year earlier
The world’s largest Smartphone maker Samsung Electronics on Thursday reported an expected 30 percent profit plunge on the back of a highly damaging recall crisis that harmed its reputation.
The quarter three earnings were announced before the start of an annuals shareholder meeting which was set to approve the latest step in a complex generational change of leadership at the South Korean conglomerate, media reports said.
Samsung said its operating profit for the July-September period stood at 5.2 trillion won ($4.6 billion), compared with 7.3 trillion won a year ago, even though it is marked as the lowest in two years.
According to the reports, the expected profit slump came in the light of revised earning estimate issued by Samsung two weeks earlier after it killed off its flagship Galaxy Note 7 smartphone due to devices overheating and bursting into flames.
The model Samsung Galaxy Note 7, aimed at competing with arch-rival Apple’s iPhone, had to be discontinued and was a devastating move for a company that prides itself on the quality production of cutting-edge technology.
The scrapping of Note 7 saw earnings of the company's core mobile business drop off a cliff, with the mobile division's operating profit for the third quarter down almost 98 percent from the previous quarter at just 100 billion won, reports said.
The impact of this debacle is still being calculated, with Samsung itself predicting another $3 billion-plus in lost profits over the last two quarters. Hundreds of owners of the device have sued Samsung for inconveniences they experienced in the recall and termination process. However, Samsung said its mobile unit would focus on “expanding sales of new flagship products ... as well as regaining consumers' confidence."
According to the reports, net profits in the third quarter dropped by 16.8 per cent, the company's revenue declined 7.5 per cent over the year to 47.82 trillion won in the September quarter, the lowest since the first quarter of 2015. From the previous quarter, the revenue was down 6.1 per cent.
Net income dropped to 4.54 trillion won in the third quarter from 5.46 trillion won a year earlier. From three months ago, the net income plunged 22.4 per cent.