Samsung shares hit by Galaxy Note 7

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Samsung Note 7 goes up in flames
Samsung Note 7 goes up in flames

The impact of pulling its Galaxy Note 7 smartphones off the market has hit Samsung Electronics Co Ltd very hard.

On Wednesday, the company  cut its third-quarter operating profit guidance to 5.2 trillion won ($4.66 billion) from 7.8 trillion won due to the impact of pulling its Galaxy Note 7 smartphones off the market.

Samsung, in a regulatory filing, also cut its July-September revenue estimate to 47 trillion won from the 49 trillion won it guided for last week.

The profit warning came as anxious investors demanded answers to  the cause of the fires that led to it pulling its Galaxy Note 7 smartphones.

They also advised the Korean electronic giant to get a new model to market as shares in the company slipped to a one-month low.

The world’s top smartphone maker on Tuesday scrapped the $882 flagship smartphone in what could be one of the costliest product safety failures in tech history.

Samsung announced the recall of 2.5 million Note 7s in early September following reports of the phones catching fire.

The firm appeared to have the situation under control as it issued replacement devices with different batteries, until the new phones also began to smoke and combust.

Investors and analysts agreed that the damage to Samsung’s brand and future earnings would deepen the longer the market was left in the dark about the origin of the fault, with some already predicting lost revenue in the region of $17 billion.

“It’s good that Samsung made a firm decision on the Note 7, but people are concerned about the situation because people don’t know what the problem is,” said Kim Hyun-su, a fund manager at IBK Asset Management, which owns shares in Samsung.

“There needs to be explanation from Samsung in order for consumers to understand that problems won’t occur in the next models … Samsung needs to clearly explain and admit what went wrong.”

Samsung would likely push ahead to get the latest version of its premium S-series smartphones to market as soon as possible, fund managers said.

Typically, the South Korean company unveils a new Galaxy S phone on the sidelines of the Mobile World Congress trade show in the first quarter as it battles Apple Inc to stay at the top of the smartphone market.

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