Only in the high-stakes world of smartphones could something that costs roughly $40 turn into a headache worth $5.3 billion.
The lesser of those numbers: the price of a typical Samsung Galaxy Note battery. And the higher: the cost of the Samsung Galaxy Note 7 recall. Batteries that caught fire without warning literally turned the phone into a spectacular flameout and the most monolithic debacle in smartphone marketplace history.
Thus 2017 begins with investors cautiously optimistic, even as they weather enough intrigue to script a soap opera.
Discontinuing the Galaxy Note 7 meant a $3 billion hit spread over two quarters, including the current earnings period. But if Samsung has learned from its mistakes -- the worst perhaps that it tried to handle the Note 7 crisis on its own -- then its smartphone segment could already be on its way to recovering market share and consumer confidence: that is, up to a point.
"Samsung isn't going away, but a lot depends on releases later this year of their phone products," says Ian Cross, senior lecturer of marketing and director of the Center for Marketing Technology at Bentley University in Waltham, Massachusetts. "Will they be reliable? Customers are going to wait to see the reviews, see if people bought them. If their new products deliver on the features and functionality aspects, then they should be in good shape."
"The return of Samsung's mobile division to its peak in 2012-2013 is unlikely, in my view," says Chris Kim, chief investment officer at Tompkins Financial Advisors in Ithaca, New York. "However, this was inevitable irrespective of the Note 7 incident because the industry has become more competitive and mature."
Chinese brands, for example, are narrowing the technology gap while keeping their products cheap.
"Samsung's strategy is to stay focused on the premium segment in order to preserve margins," Kim says.
That means working to widen the gap once again with innovations from foldable screens to new features driven by artificial intelligence.
The company's first quarter is expected to be slow, says K.C. Ma, director of the George Investments Institute at Stetson University in DeLand, Florida. Yet sometime in the second quarter, "the new powerhouse Galaxy S8 is on its way with fast charging, curved Amoled screen, high-end 4K, edge-to-edge display, dual-camera lens and no buttons."
If Ma sounds excited over the phone, perhaps it's because investor enthusiasm is riding high on hope the S8 will make consumers forget all about the Note 7.
"The good news is that Samsung's stock hit a new high, a sign that it is finally shedding off the negative publicity of the battery (fires)," Ma says. "Earnings guidance was raised for the fourth quarter of 2016 to $7.2 billion, a 50 percent year-to-year increase."
While it may seem counterintuitive given all the bad press and lost revenue, Samsung stock enjoyed a mostly uninterrupted climb last year. Even during the worst of the crisis its stock stayed level, and since January 2016 it's up by two thirds.
"Samsung poses high risks and high rewards for investors," says Usha Haley, professor of management at West Virginia University and an expert on Asian business. "Samsung's patents and scandals capture some of this quandary, revealing technical brilliance and strategic derring-do, but also worrisome errors."
Consider that by some reports, Samsung obtained the largest number of patents in 2016 -- more than 8,500 -- to finish well ahead of second-place International Business Machines ( IBM), which posted less than 8,100.
"On the flip side, the new year heralded new scandals, revealed new missteps and some strategic trepidation following the Galaxy fiasco," Haley says. "The International Trade Commission found that Samsung violated trade laws. Soon after, the South Korean special prosecutor's office named (Samsung vice chairman) Jay Lee as a suspect in a political-bribery investigation."
Indeed, anyone who follows Samsung closely has gotten used to high drama. In 2012, it lost a highly publicized patent infringement case with Apple over smartphone features that included the "rubber band" effect, which causes a page to bounce when a user reaches the bottom.
And boy, did Samsung reach the bottom. The total damages amounted to a whopping $1.049 billion -- even though Samsung claimed, to no avail, that Apple had infringed on patents of its own.
But in the end, Samsung may savor a sweet, ironic ending if a crisis sparked by a battery ends with a battery-charged triumph. Samsung's SDI division recently unveiled an electric car battery that can produce 310 miles of driving range after just a 20-minute quick charge, and 372 miles overall.
"To give you some context, Tesla ( TSLA) promises an estimated range of up to 265 miles for the Model S and up to 250 miles for the Model X, and the capacity to regain 170 miles of range in half an hour," Ma says.
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He adds: "Based on these numbers, Samsung's battery stands to offer a significant improvement -- enough to keep (Tesla CEO) Elon Musk awake at night."
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