Tech giant Apple Inc. (NASDAQ:AAPL) was on the rise this morning, as chief smartphone competitor Samsung announced it would discontinue production and sales of its fire-prone Galaxy Note 7.
The move puts an end to a several month-long saga that included several reports of phone fires, device bans from airlines, and an ill-fated recall and exchange program. From the WSJ:
Samsung said in a filing with South Korean regulators that it would permanently cease production and sales of the device, following a string of reported incidents in which supposedly safe replacements of the premium smartphone overheated and in some cases caught fire.
“Taking our customer’s safety as our highest priority, we have decided to halt sales and production of the Galaxy Note 7,” the company said.
Korean-traded Samsung shares plunged 8% on the news, wiping out around $17 billion worth of the electronics giant’s market cap. Samsung advised all Note 7 users to turn off their phones permanently, and will apparently reimburse users at a heavy cost:
Daniel Kim, a Seoul-based analyst for Macquarie, estimated that the potential losses to Samsung could reach 3.1 trillion Korean won ($2.8 billion) for the last three months of the year, which would be enough to wipe out the entire mobile division’s operating profits for the fourth quarter.
Analysts are speculating the company could scrap the Note smartphone series entirely, and fall back on its Galaxy series, which outsells Note series phones by around three to one.
The big winner in Samsung’s debacle is Apple, and the timing couldn’t have been better. AAPL’s latest device, the iPhone 7, was released last month with heavy pre-order volume, and Samsung’s Note issues are likely driving many former Samsung users over to Apple.
Apple shares rose $1.32 (+1.14%) to $117.37 in premarket trading Tuesday. Year-to-date, AAPL has gained 10.25%, versus a 6.03% rise in the benchmark S&P 500 during the same time period.