Samsung Galaxy Note 7 fiasco to cost $5.4bn loss in forthcoming quarters, says Edison

Samsung Galaxy Note 7

According to Edison Investment Research, the Samsung Galaxy Note 7 disaster will cost shareholders $5.4bn in lost profit and heads are almost certain to roll. However, under the hood the analyst firm thinks that Samsung has been extraordinarily unlucky.

Commenting on the Note 7 disaster, Richard Windsor, Analyst at Edison Investment Research disclosed that Samsung kitchen sinks the Note 7 with a massive $5.4bn hit to profit.

Samsung Galaxy Note 7 fiasco will reflect in Q4 2016 and Q1 2017 results.

Recently, Samsung has updated its guidance results for Q3 2016, which indicates that the Galaxy Note 7 will have an aggressive impact on Q4 16 and Q1 17 EBIT. Q3 16 revenues / EBIT will now be KRW2tn / KRW2.6tn lower than Samsung forecast just a week ago.

This accounts for total Q3 16 revenues / EBIT of KRW47tn / KRW5.2tn. Moreover, EBIT will be US$2.3bn lower than previously forecast. Windsor said that Q4 2016 EDIT is expected to be lower by KRW2.5tn or US$2.2bn.

At the same time, Q1 2017 EBIT is also expected to decrease by KRW1.0tn or US$885m. These figures eventually indicates that over the next two quarters EBIT and cash flow will be slashed by $5.4 billion.

Samsung Galaxy Note 7 flopped due to bad management

Furthermore, Edison oversees a change of the guard at the mobile division of the company. According to reports, the Galaxy Note 7 fiasco occurred due to bad management. However, the analyst firm thinks that Apple could have done the same thing if the Cupertino-based company faced the same situation.

It is certainly a fair argument to say that Apple would have never got itself into this mess in the first place but it is important to remember that Samsung and Apple compete for users very differently.

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Apple and Samsung focus on two different platforms

While Apple fans purchase their products to access an ecosystem that is exclusively available on iOS devices, Samsung enthusiasts solely purchase products based on hardware specification. Hence, Samsung is pressurized to integrate several advanced features in a thin gadget. Meanwhile, Apple focuses mainly on software segment with little adjustments to the internals.

If you look at Samsung Galaxy Note 7, the phone features a Iris scanner. However, in case of iPhone 7, you will not find any such feature. Interestingly, both Samsung and Apple had integrated water resistance functionality. However, you should be careful since Apple will not honor any warranty in case your iPhone 7 and iPhone 7 Plus gets damaged due to water.

Samsung Galaxy Note 7 exploded due to problem with fast charging

According to analysts, the main reason for the Samsung Galaxy Note 7 to explode was with the problem with fast charging algorithm. This is combined with an unknown factor or factors.

Samsung has gone unlucky in this area. This is because incidents like explosions and fire in the past are caused by the battery. However, the previous cases of fires were attributed to Samsung SDI battery.

Edison, meanwhile, feels that if a smartphone is pulled away after 6 months, the company would suffer substantial loss in shares. Hence, Samsung acted very quickly since the company know that nearly 90 percent of the problem was with the battery.

It was certainly a correct decision to replace Samsung ADI batteries with Amperex. But by the time it was replaced, Samsung was too late. If Samsung would have integrated Amperex initially, then the Samsung Galaxy Note 7 could be hanging on the shelves of retail malls.

Anand Narayanaswamy is the editor-in-chief of Netans. He was recognized as a Microsoft Most Valuable Professional (MVP) for 9 years (2002 to 2011) and currently part of MVP Reconnect program. He is also part of the prestigious ASPInsider program. Anand has published several articles and reviews related to various software and hardware products for various software and technology related websites. He is also active on social media and also participates as an Influencer for various brands. Anand can be reached at admin@netans.com

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