Samsung’s Galaxy Note 7 recall could cost the company $1B

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Recent reports says that Samsung’s decision of recalling the 2.5 million Galaxy Note 7 phones would cost the company around $1 billion.

It was confirmed by Samsung that they have decided to recall their newly launched Galaxy Note 7 because charging of its battery is leading to fire incidents. Keeping this problem in mind the company actually has stopped the sale of these phones in the country where it is available. Samsung has also stopped the launch of the phone in the country where the phone was about to be launched.

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Recall of the phone would cost around $1billion

Now recently a report that have come up says that the shipping charge of all the phone from the retails of the different countries would cost the company up to some $1 billion, which is a big money for the company. The company has not yet confirmed any such amount, they have only said that they would have to incur a heartbreaking amount.

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Going by figures, Samsung makes a profit of $600 as revenue and $108 as operating profit on every Galaxy Note 7. For this quarter the company’s aim was to sell around 4 to 5 million units if the phone and for the next quarter it was around 8 to 9 million units. But the phone that will be produced in the month of September would go in replacing the recalled phone, which would reduce the sale of the company for whole of this quarter. It is estimated that the sale of the Galaxy Note 7, in the first quarter, would go down from 6 million to a 3 million units.

Greater threats

Even though the figures of loss seem to be big, it has to be noted that the loss would only be a small percentage of their whole expected revenue. So even though the money is big, it would not make much difference to the company’s overall finance. The main problem with the recall, that Samsung has to bare, is the change in the perception of the customers. With faulty devices being sent to market, the company has surely affected their brand image. Customers may not feel that confidences in buying the device. But the company is trying its best to manage the crisis and mitigate the impact, but then one has to wait to see that how it impacts the sale of the Galaxy 7 after the company ships out new rectified models.