Saturday, October 22, 2016

Samsung Galaxy NOTE 7 Recalls Hurts Stock and Shares

In the wake of the burning and exploding Galaxy Note 7 smartphones fiasco, Korean electronics giant Samsung finds itself reeling from massive hits to its stock after the company flat-out asked the new owners of its faulty latest product to stop using and return them.

Fortune reports that by Monday September 12, Samsung shares have just dropped by 7%, their lowest ever in the span of two months. And when aviation authorities issued warnings that the Galaxy Note 7, documented by unlucky users as being prone to catching fire and going boom while charging, was not to be allowed on board aircraft, Samsung bit the bullet and issued an alert to its customers on September 10 to have their new phones switched off and swapped as soon as possible.

As expected, investors were turned off by the inadvertent scare and pulled out a painful $15.9 billion out of Samsung’s market capital, pretty much killing the momentum of their new gadget even as Apple recently announced their latest iPhone to the public.

Analyst Lee Seung-woo of IBK Securities only sees things getting worse for Samsung in the form of abysmal sales predictions for the end of the year, saying, “Some said initially the Galaxy Note 7 could be the best smartphone ever, but now it’s possible the phone will go down as the worst ever.”

The Galaxy Note 7 recall, which started September 2, was something Samsung has never done before, much less on such a grand scale. The company has reported selling about 2.5 million units of the defective smartphone that warrant an immediate replacement, figures that would cost them revenue estimated about as much as $5 billion worth from the costs of recall alone, according to analysts.

Greg Roh of HMC Investment opines that even if Samsung manages to replace the inferior phone batteries believed to be the root cause of the Galaxy Note 7 fires and explosions, the initial scare
 the defects wrought would ensure that the model would not be selling as hot as it did when it first came out August. “Long-term, it will cost Samsung significant marketing spending to ensure the next products can overcome this issue,” he says.

After strong sales of the Galaxy S7 phones beginning March, the faults of the Galaxy Note 7 seem bent on negating these earlier gains. The recall caused Note 7 sales in the US to stop for an indeterminate period of time, while launches in Europe and other world regions have been delayed.

If it’s any comfort at all to Samsung, the iPhone 7 and 7 Plus reveals didn’t quite go over well with fans of the beloved and now removed headphone audio jack either. You can’t please them all.

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