If you’re flying this Holiday season and hope to get through the security line quickly, remember to remove any liquids, knives and Samsung’s Galaxy Note 7! As you’ve probably heard by now, this popular smart phone made headline news when it started causing fires, and has now been banned on airplanes by the FAA.
What do Samsung’s problems have to do with real estate investing?
Samsung, the world’s largest smartphone maker from South Korea, made a very expensive mistake by releasing the Galaxy Note 7 too soon.
How big a mistake? An estimated 17 billion dollars in losses, after the company’s stocks plummeted 8%.
Samsung was reportedly trying to race to the market by releasing their version of the Galaxy Note 7 before Apple’s iPhone 7. Instead of market share, the got their share of media, but not the kind they anticipated.
Just two weeks after the phone was released, Samsung was forced to recall over 2.5 million Note 7’s when faulty phone batteries suddenly burst into flames. The company issued replacement phones, but those devices were also catching fire, which caught the attention of the FAA when it happened on a commercial airline.
Samsung has a market value of $194 billion with annual sales of $179 billion, so a $17 billion loss won’t wipe them out. But if the company executives aren’t transparent about exactly what went wrong and how they plan to fix it, future sales could be affected.
What can real estate investors learn from Samsung?
Healthy competition can drive businesses to be better – to offer better products and services in order to gain market share.
But the key word is “better.” In this case, competition had Samsung rushing to be first rather than best.
In an attempt to beat out Apple, the company obviously eliminated some very important steps in their research and development. Clearly, they had not taken the time to test the batteries before releasing them.
In today’s real estate market, inventory levels are very low in the most desirable metro areas. Low supply and high demand fuels fierce competition among desperate buyers who seem to be willing to do anything to get their hands on property.
You have to exert great self control in a seller’s market like this. Be careful about cutting corners in your due diligence process, as it can end up being far too costly in the end.
If you don’t have a due diligence check list, you can download one at www.newsforinvestors.com. We also have several videos on how to do your due diligence in our website.
As for traveling during the Holidays, beware. Despite the recall by Samsung due to batteries that catch fire, and a flight ban by the U.S. Department of Transportation, there are still 200,000 Note 7’s in use.
Samsung says that 93% of the Note 7’s have been returned, but 7% of them are still out there, and that’s raising concern that some might make their way onto flights crowded with holiday travelers.
Samsung announced it would issue an update that will force the remaining 7% of Note 7 owners to turn in their phones because the update would render the phones useless by preventing them from charging.
All major U.S. cell phone carriers are also on board to set up software updates that will “brick” the Note7.
According to CNET, AT&T will release its update on January 5th, the same day as Verizon. The Sprint update will come a few days later on January 8th. T-Mobile will issue the crippling software on December 27th.
If a Note 7 owner brings one on board and it’s discovered, airline personnel will give that person specific instructions as to what they must do to keep that device powered down and safely stored. If that Note 7 user doesn’t comply, the fine for such behavior can be as high as $179,933.
So if you are an owner of a Samsung Note 7, now’s the time to give yourself a Christmas present and go trade it in.
If you’re a real estate investor, don’t rush. Be smart and follow your due diligence check list.