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Roundup: Samsung slashes preliminary Q3 earnings after discontinuing Galaxy Note 7

Xinhua, October 12, 2016 Adjust font size:

Samsung Electronics on Wednesday slashed its preliminary figure for the third-quarter earnings to reflect losses after discontinuing its fire-prone Galaxy Note 7 smartphone.

Preliminary figure for the third-quarter operating profit was revised down by a third to 5.2 trillion won (4.6 billion U.S. dollars) from its initial estimate of 7.8 trillion won unveiled last week, according to a regulatory filing.

It was down 29.63 percent from the same period of last year. From the previous quarter, it was down 36.12 percent.

Revenue was downgraded from 49 trillion won to 47 trillion won. The third-quarter revenue was down 9.06 percent from a year earlier. From the previous quarter, it fell 7.73 percent.

Final readings for the third-quarter earnings and net income will be announced later this month after an external audit and approval from board of directors.

Samsung said in the regulatory filing that the company revised its preliminary earnings in accordance with accounting standards, indicating it reflected direct costs from the Note 7 discontinuance.

The downward revision followed Samsung's Tuesday announcement to stop production, sales and replacement of Galaxy Note 7 smartphones, indicating a permanent removal of the model from its product mix.

The South Korean tech behemoth said it decided to stop the production and sales of Galaxy Note 7 for the sake of consumer safety as a top priority.

The discontinuance came as multiple cases of even the replacement phones catching fire and overheating were reported recently.

Nine fire cases were reported globally after Samsung began to exchange older models with new ones, including six in the United States, one in South Korea, one in China and one in China's Taiwan.

About 4.3 million units of Galaxy Note 7 are estimated to have been shipped globally, including 2.5 million phones that had been shipped before Samsung's announcement in early September of its global recall plan.

Given the estimated production cost of about 500 U.S. dollars per Galaxy Note 7 phone, Samsung may have suffered from 1.8 trillion won in losses from the discontinuance, according to a local brokerage estimate.

Including an estimated fall of 0.7 trillion won in operating profit and other costs necessary for refund and exchange into other smartphones, combined losses from the Note 7 incident may have reached around 3 trillion won.

HI Investment and Securities said that the Note 7 discontinuance would have a negative effect on Samsung's brand image and credibility, expecting the effect on Samsung's earnings to continue by the end of next year. Endit