Daily Management Review

Recall Crisis for Samsung Results in Wiping out of More than $14 billion off Shares


09/12/2016




Recall Crisis for Samsung Results in Wiping out of More than $14 billion off Shares
After Samsung urged Galaxy Note 7 users to switch off and return their devices following reports batteries in the handsets were catching fire, the South Korean company’s shares fell nearly 7 percent to hit their lowest level in two months.
 
Amid increased concern from investors over the potential damage that the recall could cause to the world's largest smartphone maker by market share, over 16 trillion won ($14.3 billion) was wiped off Samsung's market capitalization.
 
Shares of Samsung closed down 6.98 percent at 1,465,000 won.
 
There could be an impact to Samsung’s third-quarter operating profit to the tune of v due to the recall issue, said Myung Sub Song, an analyst at HI Investment & Securities. Down from estimates of around 12-15 million, shipments of the Note 7 is expected to total around 6 million in the third and fourth quarters by analysts.
 
"The most important thing is whether the new Note 7 which will be released from now on will have another problem or not. If it has a problem then it will have a bad impact to the Note 7 and also Galaxy S8 which will be released in the first half of next year," Myung Sub Song told CNBC by phone on Monday.
  
The Galaxy S8 is slated to be Samsung's next flagship device.
 
Samsung urged customers to exchange their Note 7 devices in a statement issued over the weekend.
"Our number one priority is the safety of our customers. We are asking users to power down their Galaxy Note7s and exchange them as soon as possible. We are expediting replacement devices so that they can be provided through the exchange program as conveniently as possible and in compliance with related regulations. We sincerely thank our customers for their understanding and patience," DJ Koh, president of Samsung's mobile communications business said.
 
Samsung's S Pen stylus can be used to carry out a range of functions from writing to translating text and comes with the Note 7.
 
By advising Note 7 users to either not turn on or charge their devices during flights, or put it in checked baggage, the U.S. Federal Aviation Administration (FAA) added to Samsung's woes on Friday.
 
In a bid to get a headstart on rival Apple’s iPhone 7 which was launched last week, Samsung released the Note 7 in August. But there are concerns that some Note 7 users could jump ship to Apple with the iPhone 7 already available for pre-order.
 
The recovery Samsung has seen in its mobile division would be hampered by these issues. Helped by raising the sales proportion of the Galaxy S7 Edge to over 50 percent of shipments in the second quarter of 2016,  the operating profit for its IT and mobile communications division – of which smartphone sales are a large chunk – were up 56 percent year-on-year.
 
With the company still going strong in other areas from semiconductors to new display technologies, investors said that the slide in Samsung shares could be a buying opportunity.
 
"We think there's no doubt that this is bad news but we think that it's totally over-represented inside everything else that Samsung at the moment is getting right. So we would be looking for this story to maybe build in the next couple of days and as the headlines reach a crescendo we would look at this as an opportunity to get into a huge company that's doing an awful lot of other things right," Neil Dwayne, chief investment officer for European equities at Allianz Global Investors, told CNBC in a TV interview.
 
(Source:www.cnbc.com) 






Science & Technology

With China Set To Dominate, 1 Billion Could Be Using 5G By 2023

Deutsche Telekom unveils next gen 5G mobile antennas in Europe

Diamonds are now the new gold

Expert Body Says Driving In A Driverless Car In An Inebriated Condition Or On Drugs Should Be Legalized

SEC’s EDGAR database vulnerable to cyber threats

Research Says The Risk Of Severe Turbulence On Planes Will Increase Due To Climate Change

Barclays and CLS Group aim to replace SWIFT with blockchain

Designing Of Cars Being Done With Hologram Goggles At Ford

The Already Surging Cyber Attacks Are Set To Rise Even Further, Says A Study

Chinese to equip smartphones with OLED displays

World Politics

World & Politics

Scholar Says Political Appointees Not As Important As Financial Ones In China For The Economy

An Expected Change In Brussels Could Be Crucial For The Euro Zone

Destroying People Who Wouldn't Help One Of His Bankrupt Businesses Was All Trump Talked About When He Met Him In 1990s: Branson

Russia Is Worried About America’s Unpredictability

No oil contracts with Iraqi Kurdistan: Iraq’s oil ministry

Donald Trump lost $ 600 million during his presidency

Britain puts its weight behind Europe in the battle between Boeing and Bombardier

EU hopes to keep the Iran nuclear deal afloat