Samsung’s Terrible 2016 Wasn’t Supposed to Be This Way

Dec 20, 2016

Samsung's 2016 started out the right way.

At the beginning of the year, 2016 looked bright for Samsung. Anticipation reached a fever pitch over the company's grand smartphone ambitions, its televisions and other electronics were well-received at CES—the industry's biggest electronics confab, in January—and it was one of the few companies in the mobile business aside from Apple actually making money.

And then the bottom fell out.

The Galaxy Note 7, a smartphone with some of the most eye-popping features ever released in a smartphone, including a top-of-the-line display, was exploding around the world just weeks after its summer release. Samsung tried to fix the problem and actually said its smartphone was safe before the explosions happened again in its second run of devices. Ultimately, the Galaxy Note 7 was pulled from stores and discontinued.

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The damage was done, but it somehow became worse when Samsung, just weeks after discontinuing the Galaxy Note 7, announced the recall of 2.8 million washing machines. Their problem? A defect that injured some owners.

"In the short term, the Note 7 and washing machine recalls are devastating profits," Current Analysis research director Avi Greengart told Fortune in an interview. "It has also badly strained relationships with its most important customers—wireless carriers who sell the majority of its smartphones."

The explosions also prompted Samsung to change tack during the critical end-of-year shopping season. Instead of shopping its products to customers anxious to buy gifts, Samsung spent the last months of the year on an apology tour. The Galaxy Note 7 and washing machine embarrassments effectively wiped out what otherwise would have been a banner year for Samsung.

The first quarter of 2016 was arguably dominated by Samsung. At CES, the company's televisions, appliances, and other products were nearly universally lauded. Samsung made great strides in improving TV picture quality and its work on the smart home was impressive. By all accounts, Samsung's CES, a time for companies to showcase their plans for the year and get people excited for what's to come, was a victory.

In March, Samsung released the Galaxy S7 and Galaxy S7 Edge, smartphones that were designed to compete with Apple's iPhone. Both handsets delivered outstanding features, including an improved camera and compelling designs, and were called by some reviewers, the best smartphones Samsung ever released. Now months since their release, they're still among the market's best devices.

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Meanwhile, Samsung made several acquisitions in 2016 that could prove extremely fruitful. In June, Samsung announced plans to acquire a cloud-services provider named Joyent that could help it improve the services that support a growing number of mobile and smart home devices it offers. In October, Samsung bought Viv, one of the most respected artificial intelligence companies in the technology industry, and a firm that could deliver critical features to future Samsung products. Those buys were followed by a blockbuster, $8 billion deal in November for Samsung to acquire Harman, a giant audio company that has a foothold in everything from audio accessories to automobiles.

Analysts nearly all viewed the deals favorably and said it could help the company expand its operation to other industries.

"Samsung can capitalize on its acquisitions in the past two years from Smart Things to Viv and more recently Harman to enter new businesses in the smart home and connected car space," Forrester vice president and principal analyst Thomas Husson told Fortune.

But not even all of that good news could overcome the troubles. Even Samsung, when asked to comment on its 2016, didn't have much to say. In an emailed response to Fortune, a spokesman only shared links to some of the company's press releases. When asked again for comment, the spokesperson didn't respond.

"It was the best of the times, it was the worst of times," Greengart said of Samsung's 2016. "Mostly the worst."

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