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The True Cost of the Samsung Note 7

Published: October 19th, 2016

A week after Samsung announced an official cessation to production of the Note 7, sparks are still flying over the South Korean company’s handling of its exploding Note 7 issues.

 

"We recently readjusted the production volume for thorough investigation and quality control, but putting consumer safety as top priority, we have reached a final decision to halt production of Galaxy Note 7s," Samsung said in a statement on Wednesday. "For the benefit of consumers' safety, we stopped sales and exchanges of the Galaxy Note 7 and have consequently decided to stop production."

 

A report from AppleInsider, after speaking with several AT&T corporate-owned store managers, revealed the extent of the anger towards Samsung.

 

"Those Samsung guys? They're not here," said one store manager. "We're getting the brunt of this, telling people that they can't get a Note 7, and before that, that we didn't have anything to give them in exchange. I can't even tell you how many people have yelled at me because the Note 7 was garbage."

 

Credit Suisse originally estimated Samsung’s lost profits from the Note 7, and its poor handling of the situation, at over $5 billion over the product lifestyle. However, as news of the complete production stop of the Galaxy Note 7 hit the market, that figure has been revised to a whopping $19 billion, including recall expenses, assuming lost sales of up to 22 million units.

 

According to Reuters, two lawsuits over the botched design and consequent fires have already been filed in the U.S. Just what Samsung needs as it hits the courts with Apple again in the ongoing patent infringement debacle.

 

Harder to estimate is the damage to the Samsung/Note 7 brand.

 

"The people this weekend? They were pissed that we could only offer them a [Samsung] phone in exchange until recently," said one AT&T store manager. "The floodgates opened when corporate said that they'd just take the [Note 7] back."

 

Among the AT&T stores AppleInsider spoke to, there have been 104 exchanges of the Note 7 in total, with 82 happening since the company loosened up its return policy for the device, allowing for other brands to be exchanged for the problematic phone. Most have switched to the iPhone, with 72 people opting for an iPhone 7 or iPhone 7 Plus in the last few days.

 

"This has probably killed the Note 7 brand name," said managing director of Charter Equity Research Edward Snyder. "By the time they fix the problem they have to go through recertification and requalification and by the time that happens, they're going up against the [Galaxy] S8 launch."

 

Samsung initially blamed an un-named battery supplier for the issue, but as reports starting to come in of replacement units catching fire too, this time when not even plugged in or turned on, it’s looking more and more like a case of passing the blame, rendering even more damage to the brand.

 

"The [Galaxy Note 7] is forever going to be tarnished and the danger is that the brand becomes irretrievably damaged as well," said Stephen Robb, a partner at UK law firm Weightmans. "They need to be writing to every customer with an apology and some form of 'compensation'... It will clearly be costly for the company but the alternative is to end up going the way of Nokia and Blackberry."

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