Samsung's Galaxy Note7 fiasco could cost the company more than $700 million

With the recent mass recall for the Galaxy Note7, an analyst predicts that it may cost Samsung 820 billion won ($738.2 million) in its second half operating profit in order to clean up its act.

The Korean tech giant recently halted the sales of its latest Note flagship over reports that a number of devices were catching fire. It was initially speculated that the problem was rooted in the charger, but it was concluded that the issue lies in the smartphone's battery. It eventually announced a recall, replacing the faulty units with new ones.

Hwang Min-Sung of Samsung Securities predicts that the recall and replacement program could cost the company 120 billion won. He further states that because of the issue, the Note7 devices produced in the month of September will be replacement units, reducing the company's sales target from 6 million units to just 3 million for the third quarter.

"In this case, it could cut Samsung's operating profit by 400 billion won, given its operating margin and selling prices," Hwang stated. Lastly, the recall will reportedly cost Samsung another 300 million won in the following quarter.

With the Note7 spelling negative insights about the company, Hwang remains optimistic that Samsung's crisis management will help make things better in the long run. "The recall is a negative factor in the short term but will surely be a wise decision because other alternative measures are unlikely to help Samsung regain confidence from consumers and investors," Hwang concluded.

Source: The Korea Herald

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