Commentary

Samsung Ended 2016 On High Note

Between its Galaxy Note 7 debacle and the struggling smartphone market, you might think Samsung would have had a bad year.

But, you’d be wrong.

Year-over-year, in fact, fourth-quarter profit rose by 50%, the South Korean tech giant forecast on Friday.

How is that possible? Chip sales are apparently booming, while smartphones are selling better than expected.

Remarkably, those factors stand to offset the roughly $3 billion in operating profit that Samsung expects to lose due to the explosively flawed Galaxy Note 7.

That figure doesn’t even include losses incurred during the third quarter. “The company already allocated the expected direct cost from the discontinuation of Galaxy Note7 sales in its third quarter earnings guidance revision,” the company recently stated.

In turn, Samsung previously predicted operating profit for the third quarter to come in at about $4.6 billion -- down 33% -- while revenue expectations have been reduced to $41.8 billion.

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Previously, in the fourth quarter, Samsung said it expects to lose somewhere between $2 billion to $3 billion.

That revelation came less than a week after Samsung officially ceased production of the Galaxy Note 7.

At the time, Bloomberg called the move a “drastic step” -- but likely necessary, given that the device has become a “major headache” for Samsung.

Last year, Samsung recalled the Note 7 after early models exploded. Customers then began reporting that their replacement phones were smoking and catching fire.

In response, the company said it planned to “normalize its mobile business by expanding sales of flagship models such as the Galaxy S7 and Galaxy S7 edge.”

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