Crisis-hit Samsung has hacked $2.3bn from its third quarter profits forecast as it deals with the fall-out from scrapping its showpiece Galaxy Note 7 smartphone. The electronics giant made the announcement - a gloomy revision of figures released just a few days ago - in a surprise regulatory filing after financial markets closed in South Korea. It cited the financial impact of pulling the phone from the market for its decision to cut operating profit guidance to $4.66bn from $7bn. The earlier figure would have been a 5% rise on last year as its components business continues to thrive but has been dragged down by the smartphone recall.
Nobody could have expected the figure that Samsung just guided for. We’ll have to see how the market reacts tomorrow.
Alpha Asset Management fund manager C J Heo
Samsung has been under pressure since reports emerged that the phone’s battery could explode and catch fire. It has now withdrawn the device from sale. Its share price has taken a pounding since news of the battery defect broke, with more than $18bn wiped off its market value. It also announced on Wednesday it had been forced to fork out for fire-resistant packages to send to its customers in the US so they could safely return devices to retailers. The shipping boxes, the company explained, were a legal requirement for shipping lithium-ion batteries or products containing them.
There needs to be explanation from Samsung in order for consumers to understand that problems won’t occur in the next models…Samsung needs to clearly explain and admit what went wrong
Kim Hyun-su, a fund manager at IBK Asset Management