Samsung had a record-breaking second quarter this year primarily because the Galaxy S7 series proved to be a massive hit. The company intended on carrying that momentum forward with the Galaxy Note 7. The new flagship launched to rave reviews but ended up being sacrificed at the altar of a battery defect. The rest is history. The recall itself is expected to cost Samsung $1 billion and analysts have now formed a consensus on what it means for the company's third quarter. Samsung's operating profit is expected to decline by as much as 8 percent due to the Galaxy Note 7 recall.
Analysts in South Korea believe that Samsung Electronics is going to bring in an operating profit of 7.4 trillion won ($6.7 billion) which will mark a decline of 8.6 percent when compared to the previous quarter. Samsung posted 8.14 trillion won ($7.23 billion) in operating profit in the second quarter of this year which happened to be its highest in two years. This sequential estimate has been adjusted following the Galaxy Note 7 recall which was confirmed on September 2. Prior to the recall analysts were expecting status quo to be maintained, with many predicting as many as 8.5 trillion won in third quarter operating profit for Samsung.
Samsung is currently replacing faulty Galaxy Note 7 units across the globe and is yet to officially resume sales. It has effectively been unable to sell its brand new flagship for more than a month and those who may have lost trust in the Galaxy Note 7 following the battery debacle may have spent their money elsewhere, on an iPhone 7 perhaps.
Some analysts believe that the financial fallout could be even greater. Samsung is yet to provide its earnings guidances for Q3 2016 but we can surely expect to see the Galaxy Note 7 recall make a dent in its figures. However, analysts in South Korea predict that Samsung might stage a recovery in the fourth quarter as they factor in customer loyalty and the fact that battery issues notwithstanding, the Galaxy Note 7 is perhaps the best smartphone money can buy right now.
