Samsung faces rough patch post-Galaxy Note 7
SAN FRANCISCO (TNS): N ITS short, troubled history, Galaxy Note 7 was the victim of a recurring overheating problem that Samsung couldn’t tamp down.
But that might be easy compared to what comes next.
The Samsung brand, once considered a gold standard in the tech industry, has been tarnished. Its stock price has been battered, shaving tens of billions of dollars from its market value. Costs associated with the termination and recall of the phablet-sized smartphone could top US$4 billion. And the pride of the South Korean company, so closely intertwined with its country’s economy and government, has been badly bruised.
Its smartphone franchise, the top globally with a 23 per cent market share in the second quarter, according to IDC, could haemorrhage sales to rivals such as Apple, LG, Huawei Technologies and new entrant Google with its Pixel phone.
“The poor response Samsung had getting in front of this problem will have a lingering effect,” says Steve Beck, founder of New York-based management consultancy cg42. “It could take one, maybe two, product cycles to recover. In the smartphone market, habits can form quickly.”
The immediate impact was underscored last Wednesday, when Samsung sliced its third-quarter operating profit forecast 33 per cent to US$4.6 billion from a prior forecast, and lowered its sales outlook to a range of US$40.8 billion to US$42.7 billion. If those revised results hold, when Samsung announces its results it would announce the
Icompany’s lowest operating income in two years.
“This has been a case study in how not to do a recall,” says Mark Johnson, an associate professor of operations management at Warwick Business School in the UK who that they began to show that there were more serious issues at play.”
The death of the Note 7 could also usher in sweeping changes among Samsung’s executive ranks. When the company announces its annual reorganisation at the end of the year, changes may be afoot in the mobile, quality-control and supply-chain operations, say Johnson and industry analysts.