Samsung hacked nearly a third of projected profits off its pre-earnings profit guidance on Wednesday in the wake of its decision to kill the Galaxy Note 7 smartphone due to battery cell issues.
The company’s revised estimate slashed profit expectations from an estimated 7.8 trillion won ($7 billion) to just 5.2 trillion won ($4.63 billion), giving watchers a first glimpse into how dearly the Note 7 debacle will cost the South Korean giant. Samsung also dropped its sales revenue estimates from 49 trillion won to 47 trillion won.
According to Bloomberg estimates, the $2.37 billion drop is nearly enough to wipe out the 2.7 trillion won ($2.39 billion) in operating income formerly expected for the quarter.
Samsung said its Wednesday revision was issued based on disclosure regulations to account for its recent decision to halt production and sales of the Note 7.
Coming off the success of its Galaxy S7 launch, Samsung in August hoped to beat Apple to the punch with the early introduction of its latest flagship device. However, the Note 7 ran into difficulty almost immediately, as reports surfaced that the device’s battery would smoke or catch fire while charging.
In early September, Samsung paused its roll out of the device and began a voluntary recall. Official recalls in several countries – including the United States, Canada, Mexico and South Korea – followed in mid-September. By late last month, though, Samsung appeared to be back on track when it began shipping “safe” replacement devices with new batteries.
But the comeback didn’t last. Soon after the replacement devices were in the hands of customers, new reports sprang up indicating the battery issue persisted in the new Note 7s. In one instance, a Southwest Airlines flight had to be evacuated when a passenger’s replacement Note 7 began smoking on the plane.
Samsung this week finally called it quits with the Note 7, but its financials and reputation have suffered significantly.
Over the past several weeks, Samsung’s stock has crashed – and burned – spectacularly. In the past three days alone stock prices plummeted 10 percent, slashing around $21 billion from the company’s market value.
The fiasco leaves the door open for rivals like Apple, Huawei and Google to swoop in and capitalize on Samsung’s losses, particularly during the upcoming holiday season.
In the United States, Verizon has already said it will likely shift its holiday marketing efforts to focus on the new Apple iPhone 7 and Google Pixel smartphones. And without a new Samsung device in the market, other carriers will probably follow suit.
Other major vendors like Chinese players Huawei, OPPO and Vivo will also have a chance to take market share from Samsung, though Huawei will have less advantage than Apple or Google in the U.S. market due to its lack of carrier partnerships.
Huawei has previously said it is aiming to surpass both Samsung and Apple to become the leading smartphone brand in the world within the next five to ten years.
