Samsung Electronics vows mobile rebound after third-quarter Note 7 shock

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SEOUL Samsung Electronics Co Ltd on Thursday said it aims to recover quickly from the disastrous withdrawal of the fire-prone Galaxy Note 7 that dragged third-quarter mobile earnings to their lowest in nearly eight years.

The world's top smartphone maker saw its mobile earnings plunge 98 percent from a year earlier to its lowest since the fourth quarter of 2008, barely avoiding its first-ever loss and dragging the firm's overall profit to a two-year low.

Samsung said July-September operating profit was 5.2 trillion won ($4.57 billion), matching its revised guidance. The South Korean firm had initially estimated a 7.8 trillion won profit but cut its guidance to reflect losses incurred in the withdrawal of the fire-prone Note 7s.

"Looking ahead to the fourth quarter, the company expects earnings to improve (from a year earlier) driven by strong performance in the components business," Samsung said in a statement.

"The mobile business expects a recovery in its earnings to a similar level with that of the fourth quarter of 2015."

The mobile division booked an operating profit of 100 billion won in the third quarter.

">SEOUL Samsung Electronics Co Ltd on Thursday said it aims to recover quickly from the disastrous withdrawal of the fire-prone Galaxy Note 7 that dragged third-quarter mobile earnings to their lowest in nearly eight years"

Earnings from smartphones and tablets have been the main driver of Samsung's rise into a global tech giant, accounting for 38 percent of total income last year.

Samsung said it aims to bolster fourth-quarter earnings through its Galaxy S7 phones and new lower-tier models in a bid to record profit close to the 2.23 trillion won it reported in October-December of 2015.

"I am not positive about Samsung's mobile business until the first quarter, although the components division will remain solid,” SK Securities analyst Kim Young-woo said.

The Apple Inc rival has already warned of another $3.1 billion hit to profit through the first quarter of 2017, all but guaranteeing a third straight year of earnings decline for the smartphone business.

Investors now expect sweeping management changes and restructuring in response to the Note 7 failure, while warily watching for signs of long-term impacts on the sales of other Samsung brands.

Samsung shares were up 0.5 percent in early trade after the results announcement, compared with a 0.4 percent gain for the broader market.

FRUSTRATIONS

Many are frustrated that Samsung still does not know what caused the fires in some of the Note 7 devices that were sent to customers as replacements for the initial 2.5 million phones it recalled due to fire-prone batteries.

The company gave no further insights in its earnings announcement.

Development of the next Galaxy S smartphone - expected to launch in March 2017 - has slowed as Samsung works to make sure there will be no repeat of the over-heating problem, a person familiar with the matter told Reuters.

The launch is unlikely to be brought forward to make up for Note 7 sales, the source said, contrary to some investors' belief that the new Galaxy S will be fast-tracked.

Stronger earnings from the company's components businesses was a bright spot in the third-quarter results. The semiconductor division reported a 3.37 trillion won profit for July-September, its highest since the third quarter of 2015.

(Reporting by Se Young Lee; Additional reporting by Hyunjoo Jin; Editing by Stephen Coates)