Investors scorn Samsung over suspended Note 7 sales

Added 11th October 2016

Shares in the South Korean electronics company fell considerably (7.5%) after the company suspended production of its Galaxy Note 7 smartphone due to persistent safety problems.

Investors scorn Samsung over suspended Note 7 sales

While 19 trn Korean won (£13.8bn, $16.9bn) were wiped off Samsung Electronics’ market value during trading on Tuesday, the night before, rival Apple finished strong with shares up 1.7% at $116.05.

Samsung was forced to freeze worldwide production and sales of the latest version of its flagship smartphone device, following reports that replacement handsets, issued after a recall, had caught fire.

The original model of the £739 Note 7 was recalled by Samsung back in September when issues with the battery cell prompted a series of fire-prone and, in some cases, exploding devices.     

The continuation of the Note 7 exploding phone saga comes just before the release of Samsung’s Q3 earnings results on 27 October and before the holiday sales period kicks off.

At a time when the world’s largest smartphone supplier needs to retain consumer confidence, analysts are speculating that this second product recall in two months could prove disastrous for Samsung and a major boost for competitors Apple and Google.  

Apple’s jump in share price on Monday saw the stock close higher than it had since last December. Shares in Google also recovered some lost ground after a dip toward the end of September, trading up 1.68% at $814.17 on Monday.  

Despite Samsung's unfortunate missteps, AXA Framlington Global Technology fund manager Jeremy Gleeson still thinks the firm has a lot going for it. 

"They have put out some very important products over the years so I don’t think customers will be completely switched off," Gleeson remarked.

“Outside of smartphones, they are still the leading supplier of memory chips. Those chips continue to get used in a whole variety of industries so if anything, that should continue to bode well for Samsung.”  

Samsung also retains its title as one of the early adopters of manufacturing organic light-emitting diode (OLED) screens and holds a healthy marketshare, said Gleeson. And with Apple announcing plans to release its first iPhone models with OLED displays, Samsung is well-placed to benefit. 

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