Samsung moves quickly to put out fire

TWENTY billion dollars. That’s the value that was wiped off the market capitalisation of Samsung Electronics in two days this week as investors took stock of implications of a global recall of the Galaxy Note7.

But the reputational damage is likely to be short-lived, analysts believe, provided the company properly manages the crisis precipitated by reports of exploding Note7 batteries.

The crisis comes at an unfortunate time for Samsung. Not only had the Note7 been receiving highly positive reviews but the large-screen phone has been stealing some of the limelight from Apple leading up to the launch in California this week of the iPhone 7 and 7 Plus.

Brian Neilson, research director at Johannesburgbased BMI-TechKnowledge, said the battery crisis would inflict short-term damage.

The decision to recall millions of Note7 units was the right thing to do, Neilson said. “But they have gone beyond this — at least in their home market of Korea – softening the blow by giving consumers a temporary replacement smartphone on loan.

“If they could do this in all 10 countries in which the 2.5 million ‘phablets’ were recalled, that would be a huge demonstration of goodwill, mirroring the high levels of service Samsung users in South Africa have grown used to when having a broken screen replaced for free.”

He said Samsung must be relieved that it was the Note7 and not its smaller handsets, which sell in higher volumes, that had to be recalled.

“Two-and-a-half million is a large recall, but nothing like the almost 300 million units it ships annually.”

The debacle of the Note7, which had not yet gone on sale in South Africa, might prompt some consumers to consider large-screen devices from Chinese rivals and from Apple. “But those in the market for a smaller Samsung phone are still likely to keep the brand near the top of their list,” said Neilson.