Samsung Electronics announced today that it estimates a negative impact of approximately mid-3 trillion won ($2.65 million) in operating profit from the fourth quarter of 2016 through the first quarter of 2017, due to the discontinuation of Galaxy Note7 sales. The Note 7 discontinuation will cost in the mid-2 trillion won range during the October-December period and another 1 trillion won ($884 million) during the January-March quarter, the company said in a statement.
The company already allocated the expected direct cost from the discontinuation of Galaxy Note7 sales in its third quarter earnings guidance revision, but expects the drop in revenue from the discontinued sales to continue to have a negative impact on operating profit for the next two quarters.
Samsung slashed its third-quarter profit forecast by $2.6 billion earlier this week, an amount that could wipe out its entire mobile business profit. That did not include the cost of Samsung's first recall, which analysts estimated at 1 trillion won to 2 trillion won.
Despite the problems, Samsung said it expected to generate 5.2 trillion won ($4.6 billion) in operating income during the third quarter - after the recall cost.
The company added that it will make significant changes in its quality assurance processes to improve product safety.
Moving forward, Samsung plans to normalize its mobile business by expanding sales of flaship models such as the Galaxy S7 and Galaxy S7 edge.
The botched recall raised questions about Samsung's initial analysis of the Note 7 phone's problems. At first, Samsung said a minor manufacturing error in the batteries for the Note 7 was causing the phones to overheat.
The problem with the replacements is still unclear. Experts say Samsung may have rushed to conclude the Note 7's problem was a battery issue and it may take a long time to find the real cause.
Seeking to retain customers, Samsung is giving an incentive of a $100 credit to Note 7 owners who switch to another Samsung phone.