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Samsung operating profit plunges 30% in wake of Note 7 fiasco Samsung operating profit plunges 30% in wake of Note 7 fiasco
(about 3 hours later)
The world's largest smartphone maker Samsung has seen its operating profit plunge by 30%, pulled down by the recall of its high-end Note 7 phone. South Korean technology giant Samsung has seen profits plunge after the recall of its Galaxy Note 7 smartphone.
Operating profit for third quarter stood at 5.2tn won ($4.6bn, £3.8bn), down from 7.3tn won last year. Operating profit between July and September fell 30% from a year earlier to 5.2tn won ($4.6bn, £3.8bn) - the lowest level in two years.
The figures mark the lowest level of operating profit for the South Korean company in two years. The world's largest smartphone manufacturer stopped making the Note 7 after reports of them catching fire.
Samsung halted production of Galaxy Note 7 smartphones after reports of their catching fire. Meanwhile the firm's shareholders have backed Samsung heir apparent Lee Jae-yong joining the board.
The weaker profit numbers match the firm's revised guidance, which had already been cut to reflect losses incurred by the withdrawal of the Note 7. He is grandson of the firm's founder Lee Byung-chull. and the son of Samsung chairman Lee Kun-hee.
The company's mobile division reported an operating profit of 100bn won, the lowest since the fourth quarter of 2008, and a plunge of almost 98% compared to the previous quarter. The appointment is being seen as a big major step towards his overall control of the family-run group.
Samsung said its mobile unit would focus on "expanding sales of new flagship products... as well as regaining consumers' confidence." But Mr Lee's appointment has raised some questions from critics who say he has not held any major role at the firm and was taking a place on the board through birth rather than by merit.
Recalling and then scrapping the Note 7, which competed with Apple's iPhone, has been seen as a blow for the company's reputation for quality and reliability.
Samsung said its mobile phone unit would now focus on "expanding sales of new flagship products... as well as regaining consumers' confidence."
However its next major handset launch, the Galaxy 8 is not due until next year.
"Samsung has lost consumer confidence, but I think it still has at least one more chance. Rather than rushing to release the next product, it should conduct a thorough inspection and explain the results of its investigation into the Note 7," said Greg Roh, an analyst at HMC Investment Securities.
Note 7 fiascoNote 7 fiasco
The South Korean technology giant in October recalled its new Galaxy Note 7 smartphone after reports of phones overheating and catching fire. Samsung had first tried to replace the phones with improved devices, but this was scrapped when reports started coming in of the new handsets also overheating and catching fire.
A first effort to replace the phones with improved devices was scrapped when reports started coming in of the replaced handsets also catching fire.
Eventually, Samsung stopped sales and halted production of the phone.Eventually, Samsung stopped sales and halted production of the phone.
The discontinuation of a model, which competed with Apple's iPhone could be seen as a blow for the company's reputation of quality and reliability. And while the weaker profit numbers were in line with the firm's revised guidance, there was no doubt the fiasco had "a big impact" according to Jake Saunders of ABI research.
Samsung's main rival on the smartphone market, Apple, earlier this week reported falling sales and revenue for the first time since 2001. "It's painful - the Note 7 should potentially have sold 15 to 17 million units and that's gone," he told the BBC. "That's now suddenly an opportunity for other smartphone makers to jump in."
Apple's forth quarter revenue fell 9% to $46.85bn still beating analyst expectations though. The troubles come at a time when high-end smartphone makers are seeing sales slow - as they struggle to encourage consumer sin developed markets to upgrade to newer models.
Earlier this week, Samsung's main rival in the smartphone market, Apple, reported falling sales and revenue for the first time since 2001.