By Geoffrey Smith
October 12, 2016

Good morning.

Samsung’s spectacular self-inflicted crisis continues to shock and awe this morning. The South Korean company put out its first estimate of the financial damage from lost sales of its Galaxy Note 7 Wednesday, revising its forecast for third-quarter operating profit by 33 percent to $2.3 billion. Analysts say that the company could lose up to $17 billion in revenue from the fiasco, so there is a certain imperative to be up-front with the losses, the better to manage market expectations.

That $17 billion figure doesn’t even begin to incorporate the damage to its brand. The company will need to be painfully thorough with its explanations to convince customers that future products won’t be subject to similar problems. Nor can it be certain that future customers will distinguish between smartphones and other Samsung-branded devices and appliances which all have a role to play in its strategy for exploiting the Internet of Things, and which don’t catch fire. Having your name in front of the consumer at every turn can be a two-edged sword.

Samsung hasn’t risen to its current lofty status by accident. It’s an excellent company with a strong record of turning out excellent products. But it will need to show a heroic degree of frankness and humility to confront this, and that–putting it mildly–hasn’t always been a hallmark of South Korea’s chaebols.

More news below.

Geoffrey Smith


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