Samsung Kills Off Note 7 After Second Round of Battery Fires

Company had already recalled 2.5 million Note 7 phones
Regulators, carriers had pressed Samsung to halt sales

Samsung Electronics Co. is ending production of its problematic Galaxy Note 7 smartphones, taking the drastic step of killing off a device that became a major headache for South Korea’s largest company.
Samsung had already recalled the Note 7 once last month after early models exploded and the latest move comes after customers reported that replacement phones were also catching fire. Samsung will be without its highest-end smartphone that was supposed to compete against Apple Inc.’s iPhones and other premium devices during the holiday shopping season.

The crisis has left Samsung scrambling to figure out the cause of the battery fires and to explain how a company known for manufacturing expertise could have missed such a critical product flaw twice. Samsung originally blamed one battery supplier for the problems and switched to an alternative company, but that did not end the problems.

“Samsung needs to act swiftly and move on to protect their brand image,” said Mark Newman, an analyst with Sanford C. Bernstein in Hong Kong.

Samsung Electronics shares fell 8 percent in Seoul Tuesday, wiping out about $17 billion of market value, before the Note 7 termination was announced. The stock dropped further in London trading after the news, sliding as much as 9.9 percent.

The company has not said how many new or replacement phones will be affected by the latest announcement. Analysts estimated the original recall would cost between $1 billion and $2 billion, but that figure will now certainly rise. Chung Chang Won, an analyst at Nomura Holdings Inc., estimated in a research note before the company’s announcement the worst-case scenario of Samsung terminating the Note 7 would cost the company about $5 billion in operating profit through 2017.

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