Samsung on Tuesday lost $17 billion of market capitalization after the official announcement of the stop exploding sales of smartphones Galaxy Note 7 and the complete cessation of the production of gadgets in connection with allegations that the fire devices are continuing even after the repair.
The life of the device, which was supposed to be the new flagship mobile devices from Samsung, from the beginning has not worked: soon after introduction in August began to receive reports of spontaneous combustion of the battery. The company tried to remedy the defect by withdrawing the gadgets all over the world and replacing batteries, but the problem of spontaneous combustion is not solved. On Tuesday after the announcement to cease production of the Galaxy Note 7 Samsung shares fell by 8%, the capitalization of the company decreased by $17 billion.
By coincidence, at $17 billion, analysts at Credit Suisse estimated the loss of Samsung as a result of discontinuing sales of the Galaxy Note 7. For comparison, the company’s operating profit in the third quarter of 2016 amounted to $6.6 billion Previously estimated that lost revenue and the costs of product recall from the market will not exceed $5 billion, while analysts proceeded from the full resumption of sales of Galaxy Note 7 in the fourth quarter.
Samsung on June 30 had cash liquidity of about $69 billion, is expected to allow it without too much difficulty to absorb losses. However, mobile phones are the most important source of income of the company. In the second quarter of 2016, the share of smartphones accounted for more than 51% of the sales volume of Samsung and 53% of operating revenues. Other income — household appliances (12.6% of operating revenues in the second quarter) and components (processors, memory chips, displays; 34.2% of revenue in the second quarter).
The current double fiasco Samsung may be adversely affected by the degree of consumer confidence in the company’s products. Some experts believe that the failure has ruined the reputation of the entire series of Galaxy Note and downgraded the relationship to other models of Samsung phones.
“This case is the biggest I’ve seen in the segment of mobile phones for work all the time. No matter how much I worked on the market, this review I have not seen”, – said the head of the American operator Verizon Lowell macadam, working in the field of communication since the 1980-ies.
At the moment, buyers who have the original Galaxy Note 7 or the updated model issued instead, it is recommended to disable it, do not use and try not to resort to whatever methods of correcting the defect themselves.