Samsung’s losses from Note 7 disaster keep mounting

In this Sept. 11, 2016 file photo, powered-off Samsung Electronics Galaxy Note 7 smartphones are displayed at the company's service center in Seoul, South Korea. Samsung’s recall of 2.5 million Galaxy Note 7 phones after several dozen caught fire and exploded may stem from a subtle manufacturing error, but it highlights the challenge electronics makers face in packing ever more battery power into ever thinner phones, while rushing for faster release dates. (AP Photo/Ahn Young-joon, File)

Samsung’s expected losses from the Galaxy Note 7 catastrophe have soared above $5 billion.

The South Korean tech giant announced this week it was killing off its flagship Note 7 smartphone. The move came after reports kept emerging of the devices catching fire — even after Samsung (SSNLF) had promised customers that replacement phones it was providing were safe.

Analysts saw the decision to ditch the Note 7 after weeks of crisis as an attempt by Samsung tosave its brand image and shield other smartphones from the fallout. But the company is still coming to terms with the financial damage from canning an entire product line.

On Wednesday, it said it expected the move to knock about $2.3 billion off its operating profit for the three months to Sept. 30. And on Friday, it forecast a further hit of around $3.1 billion to operating profit for the six months through March 2017.

But even more pain could be yet to come. Nomura Securities predicted this week that the decision to ditch the Note 7 would cost Samsung $9.5 billion in lost sales and put a $5.1 billion dent in profit between this month and the end of 2017. The company’s stock is down around 8% since the start of the week.

Samsung is still trying to figure out what caused some Note 7s to burst into flames. It recalled 2.5 million of the phones in early September, blaming a battery fault. It promised then that replacement devices would be safe.

But reports began to emerge of the replacement phones also catching fire, which forced Samsung to give up on the Note 7 product entirely.

The company has been offering customers financial incentives — including $100 credit in the U.S. — to trade in their Note 7s for other Samsung phones.

It said Friday that it’s aiming to expand sales of its Galaxy S7 and Galaxy S7 edge phones to try to stabilize its mobile business.

— K.J. Kwon contributed to this report.

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