Samsung Now Faces 3 Tough Choices With Its Note 7

Are we looking at the beginning of the end of Samsung’s Galaxy Note 7? I wouldn’t have considered raising the question a few weeks ago, even after Samsung announced the recall of more than 2.5 million Note 7s globally, amid reports the lithium-ion batteries inside the phones were overheating and catching fire.

Samsung intimated that the exchange of at-risk Note 7s for safe replacement devices was going along swimmingly. More than 60% of the faulty phones were traded in, and most were swapped for the new Notes.

My expectation was that Samsung, one of the leading electronics powerhouses in the world and with an awful lot at stake in the matter, would get to the bottom of Battery-gate and fix it.

That was before I heard that a replacement Note 7 apparently caught fire Wednesday morning on a Southwest Airlines flight bound from Louisville to Baltimore. For the record, Samsung says it is still investigating, and maybe there is a reasonable explanation here.

But there have been reports of other replacement Note 7s overheating, and at the very least the Southwest incident has to give you pause.

In a statement emailed to Amira News, U.S. Consumer Products Safety Commission chairman Elliot Kaye, says that “CPSC is moving expeditiously to investigate this incident.” Putting aside any safety issues for a moment — and the fact that this happened on an airplane makes it all that much scarier—there is the damage to Samsung itself. By all accounts, this has been an unmitigated public relations disaster for the company, made more unfortunate by the fact that the Note 7 received glowing notices upon its arrival, helping Samsung regain its footing in, pardon the pun, the hotly competitive smartphone business. (It didn’t exactly help Samsung’s reputation that some of the company’s washers were also exploding.)

Samsung’s third quarter earnings guidance comes Friday.

The timing of this latest incident couldn’t be worse. On Tuesday, Google announced the new Pixel and Pixel XL smartphones, and while all we really have to go on until we test the new Pixels is a lot positive buzz, these new handsets indeed look very promising, and could cut into, if not, outright threaten, Samsung’s dominant position with Android.

Meanwhile, Apple’s new iPhone 7s have also been well received, even if the phones lack all the extra features Samsung put into the Note 7 (expandable storage, fast wireless charging, etc.) and the expectation is that Apple is saving its most monumental changes for next year’s iPhone, the tenth anniversary.

Three not-so-great options

So where does this leave the Note 7? It seems to me Samsung is left with three not-so-great options, assuming of course that the problems with the replacement Note 7s are what they appear to be.

The least-best choice is that Samsung tries again with the Note 7s and attempts to fix what the company claims was already fixed. Something along the lines of, `trust us, we really did it get it right this time.’ Good luck with that one.

Second, Samsung could pull the plug on the Note 7s as we know them, write down the inventory, and come back in relatively short order with a rebranded phone that gives us most, if not all the Note 7 features — maybe a Note 7 Special Edition or some such. That’s also a difficult sell. You have to know that Samsung is already at work on the Galaxy Note 8, so does it make much sense for the company to invest time and lots of money on what would at best be an interim measure?

Third, accelerate the development of the Note 8 itself. Samsung could wait until next summer to bring out the Note 8 on what would be its “normal” release schedule. Or it could speed up that release. Again, this is hardly a perfect remedy. First off, releasing the phone early could intrude upon a Galaxy S8 release, the next iteration of Samsung’s “other” premium smartphone, the Galaxy S7, which was first showcased last February during the Mobile World Congress confab in Barcelona.

What’s more, rushing a phone to market before it is ready could get Samsung into the same kind of trouble it finds itself in now, only this time it could be a mortal blow to the company’s smartphone business.

None of these are ideal outcomes for Samsung, of course. Perhaps the company’s best course is to take the hit, and move on from here.

Consumers may also be best advised to move on. In his statement, CPSC chairman Kaye said, “I want to reiterate my call for consumers who have the recalled Galaxy Note7 to keep their smartphones powered down and to immediately take advantage of the remedies being offered by Samsung. Consumers should know that one of the remedies is a refund.”

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