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Samsung bounces back from Note 7 recall with its best quarter in three years

It turns out that Samsung’s business is doing just fine following one of its most embarrassing product fumbles in recent memory[1]. The company posted fiscal fourth-quarter earnings today in line with expectations outlined this month[2], earning 9.2 trillion won (about £7.2 billion) in profit on sales of 53.3 trillion won (about £45.8 billion). That’s a more than 50 percent jump in profit from the same period a year ago.

It also makes this quarter Samsung’s most profitable in more than three years[3], despite the Galaxy Note 7 recall that has embroiled the South Korean company in controversy for the last five months.

Just this past Sunday, Samsung released its report on the Note 7[4] that detailed how a rushed manufacturing schedule and irregularly sized batteries from one of its own subsidiaries caused some units to overheat and, in some cases, catch fire. The Note 7 recall did in fact drag on Samsung’s earnings in the fiscal third quarter of last year[5], causing the company to earn about £2.2 billion less than its projected £6.6 billion in profit for Q3 2016. However, this dip appears to have been temporary.

Samsung’s strong quarter came mostly from sales of memory and displays

Samsung says the strength of its display and computer memory divisions helped it climb back. “Robust sales of high-end, high-performance memory products and expanded process migration in V-NAND, plus strong shipments of OLED and large-size UHD panels contributed to profitability,” the company wrote in a statement.

Also helping Samsung in this case is a weaker Korean won relative to the US dollar. Because component deals — like OLED displays and memory, for instance — are often conducted in USD, profits from these sales were higher than normal last quarter, the company added.

That’s not to say that the S7 and Samsung’s lower-budget phone lines have been doing poorly. Samsung’s mobile division managed to post a year-over-year profit increase of about 4 percent to about £2 billion, having endured most of the Note 7’s costs in Q3.

The company says it expects a noticeable bump in sales of low-cost phones in the Galaxy A and J series to help boost sales in the coming months as well.

Although these financials will go a long way in helping Samsung reverse the damage done by its exploding phone, there is still a considerable branding hurdle the company will have to clear in the coming months.

Earlier today, Samsung executives said the Note brand will remain active[6] as the company preps for the release of the Galaxy S8 and subsequent Note 8.

So while the company has proven that it can still make considerable profits while weathering a product disaster, it will still have to deliver an immeasurably superior line of smartphones this year if it’s to continue holding onto its leadership position in the Android ecosystem.

References

  1. ^ most embarrassing product fumbles in recent memory (www.theverge.com)
  2. ^ expectations outlined this month (www.theverge.com)
  3. ^ Samsung’s most profitable in more than three years (news.samsung.com)
  4. ^ Samsung released its report on the Note 7 (www.theverge.com)
  5. ^ drag on Samsung’s earnings in the fiscal third quarter of last year (www.theverge.com)
  6. ^ Note brand will remain active (www.theverge.com)

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