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Samsung Flags $5.3 Billion Profit Hit From Note 7 Failure
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Samsung posted earnings of $7.2 billion in the second quarter, with mobile profits -- its biggest earner -- soaring 57 percent.
The Note 7 debacle has come at an awkward time for South Korea's biggest family-run conglomerate, which is in the middle of a leadership succession and is facing calls for a major restructuring from U.S. hedge fund Elliott Management.
Park Jung-hoon, a fund manager at HDC Asset Management which owns shares in Samsung affiliates, said that although future losses would not be as bad as the third quarter the company had to work hard to rebuild confidence.
"What's important is whether the flagship S7 can fill the gap left by the Note 7, and how much trust Samsung can regain from consumers by the time the S8 comes out," he said. Analysts expect the S8 to be released in the first quarter.
Key to brand recovery would be rapidly finding out and communicating what went wrong with the Note 7, which was recalled when some devices were found to be combustible and finally discontinued when customers reported similar faults in their replacements.
The company blamed faulty batteries for the original problem but it has given no inkling about the cause of overheating in the replacements.
"Samsung must announce clearly what the reason was and dispel uncertainty," Park said.
Investors were also expecting the company to show its "commitment to shareholders" by announcing share buybacks or higher dividends, he said.
Samsung has announced financial incentives for U.S
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