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Investors Want Answers About The Samsung Debacle

In the wake of the headline-grabbing choice to discontinue production of its Galaxy Note phone due to seemingly intractable battery fires, Samsung’s investors want some clarity about what exactly went so wrong.

Investors are demanding that Samsung quickly get a handle on what is causing the phones to spontaneously combust, get it fixed and get a new model to market.  The order came as Samsung shares continue their free-fall to a new one-month low.

The loss of the $882 flagship phone comes at a particularly inoppurtune time for Samsung, as Google is pushing its new high-end Pixel phone out to be the high-end competitor for those who are less than enamored of iOS or Apple products.

The plug-pulling comes about a month after Samsung announced its decision to pull 2.5 million phones from the market with a recall. Though the electronics firm initially moved to replace the phones with different batteries — it seems the problems run deeper than initially thought, since the phones kept catching on fire.

Analysts have already begun predicting lost revenue in the $17 billion range.

“It’s good that Samsung made a firm decision on the Note 7, but people are concerned about the situation because people don’t know what the problem is,” said Kim Hyun-su, a fund manager at IBK Asset Management, which owns shares in Samsung.

“There needs to be an explanation from Samsung in order for consumers to understand that problems won’t occur in the next models … Samsung needs to clearly explain and admit what went wrong.”

The current theory is that Samsung will now push to get the S-series of its premium smartphone to market — ASAP — as opposed to waiting until Mobile World Congress during Q1.

“We’ll have to see what the future plans are but I suspect Samsung will move quickly to get the Galaxy S8 ready; they have the manufacturing and production capabilities,” Kim noted.

The bigger issue right now is that Samsung remains unsure why the phone are catching fire — and if the issue that effected the first round of phones is the same issue that plagued the recalls. The other open question is what level of damage the recent run of negative stories had on Samsung’s brand.

 

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