Samsung Targets a Big Comeback after Note 7 Disastrous Failure

Samsung Electronics Co LTD vowed to recover from the recent disastrous withdrawal of its Galaxy Note 7 that dragged their earnings to the lowest level in nearly eight years.

The technology giant has released statements about expanding its investigation about Note 7’s exploding battery and assured its investors they would get to the bottom of one of the worst technological failure in history.

Co-Chief Executive J.K. Shin said at a general meeting in Seoul, “We know we must work hard to earn back your trust and we are committed to doing just that.”

Investors voted on Thursday to make Samsung Group’s de facto chief, Jay Y. Lee, as Samsung Electronics director in response to the Note 7 battery failure.

Jay Lee, son of the infamous Lee Kun-hee will now play a bigger role at the group’s flagship company. He also plays a public role in setting strategy.

Chief Executive Kwon Oh-hyun said at the shareholder meeting that they would assign a new role only after the investigation is finished.

Samsung, the world’s top smartphone maker plunged 96% in their third-quarter earnings, a loss of almost 100 billion won ($87.63 million). This is their lowest level since 2008.

The mass pull out of Galaxy Note 7 resulted to -0.1% to -0.2% points from South Korea’s third-quarter GDP growth in quarterly terms, a finance ministry official told Reuters on Tuesday.

The company blames Samsung SDI Co Ltd, who supplied batteries for the first Note 7 recall. The subsidiary reported an 110 billion won operations loss for the third quarter.

Apple Inc, Samsung’s main rival aimed to achieve a fourth-quarter profit close to October-December of 2015, on the back of sales of Galaxy S7 phones and lower-tier models.

“Looking ahead to the fourth quarter, the company expects earnings to improve (from a year earlier) driven by strong performance in the components business,” Samsung said in a statement.

Samsung sees another $3.1 billion hit to profit with the Note 7 withdrawal through the first quarter of 2017.

Software issues may also exist

The company is still investigating what caused the Note 7 fire.  This is because replacements for the initial 2.5 million Note 7’s it recalled was due to fire-prone batteries.
Co-CEO Shin said the battery might not be the only problem. Consequently, they are now looking into software issues to determine the root cause.

Rattled investors now want a concrete plan on how to revive the company’s earnings, repair its major brand, and boost shareholder returns.

LS Asset Management fund manager Kim Sung-soo said, “The key is whether Samsung will be able to remove the uncertainty surrounding the Note 7 and maintain its leading position in the smartphone market.”

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iPhone 7 Shortage to Cause Huge Profit Loss for Apple

A miscalculation for the demand of iPhone 7 Plus this Holiday Season caused Apple to lose a huge amount of profits. Apple Inc. forecasted demand of the particular model fell short this year, unaware of the number of people who intends to buy their iPhone 7 Plus.

According to Mariann Montagne, Apple’s projected value of demands for the holiday quarter fell from 38% to 38.5%, but the actual value is at 39%. Montagne is the senior investment analyst and portfolio manager at Gradient Investments.

The reason for the surge of consumers who wanted to get their hand on the newest, biggest smartphone out in the market is not yet apparent. The company is looking at the customers they gained after the failed launched of Samsung’s Galaxy Note 7. These are the unanticipated numbers of consumers which they had gained over their rival company.

Luca Maestri, Apple Chief Financial Officer said in a Reuters interview that it was “impossible to know” the effect of the Galaxy Note 7 recall.

Earlier in this month, Samsung recalled all of their Galaxy Note 7 handsets because of the battery defects which caused the explosions. Based on the South Korean company investigation, Note 7s are even more vulnerable to catch fire when it is charging. The company ultimately stopped the production their Note 7s.

Holiday shopping spree

Apple’s Chief Executive, Tim Cook said on Tuesday that the company is uncertain if they can mass produce the iPhone 7 Plus. The demand is too high to furnish the remaining order in time for the Christmas shopping rush. Furthermore, Maestri added that “We cannot fulfill all the demand that is out there right now,”

Cook said that the company is overwhelmed by the imminent demand, “particularly on the iPhone 7 Plus versus our forecast going into the product launch”, as the company compares their projected assessment prior to the launch. He also added that the company will just need to manage to the smaller version of the handset model, the iPhone 7.

Disappointed Investors

In the mobile business world, “the bigger phones bring bigger profits” is the magic formula for success.

In the quarterly earnings report on Tuesday, Apple’s investors raised their concern over the company’s miscalculations on the demand. John Jackson, an IDC analyst said, “You’re not able to get that product into the hands of the person who wants it right here, right now. Those are dollars not in your hands.”

On September 7, California-based Company, Cupertino launched its newest iPhones. The iPhone 7 Plus model has a 5.5-inch (14 cm) dual camera on the back, the first kind of its breed. It features a better quality for portrait shots and can be zoomed further away.

Jan Dawson, the analyst for Jackdaw Research said, “It’s inherently tough to know how things like new finishes and features are going to affect demand for a new model”.

According to him, Apple is still learning how the consumer reacts to new features of larger and smaller phones. This was apparent when the company produced only two competitive sizes back in 2014.

Quality over quantity

For analysts, rushing mass production of the unit would be difficult if not nearly impossible. Trip Chowdhry, the managing director of Global Equities Research said that the “company cannot contract new suppliers, hire more workers and open factories overnight”.

He also added, “You can’t just shoot iPhones out of an assembly line at the speed of a bullet”. While pointing out that, “Apple does things to perfection. There is no need to rush and create an inferior product the way Samsung did.”

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