Samsung's $1B market cap ding, and a lesson in common sense
A little financial porn to go with your morning coffee and bagel combo, served with a slice of news from the Department of Common Sense.
The Wall Street Journal reported Samsung's market cap dipped by close to 1 percent in late trading on Monday in Seoul, following the news that the company's case against Apple at the U.S. International Trade Commission failed to see older iPhones and iPads barred from import, after the Obama administration intervened at the eleventh hour.
While it's true, the company did lose about $1 billion worth of its value on the Korean stock market, it's little cause for alarm. It was a mere hiccup.
Here is $1 billion to Samsung visualized. (I've even added a big red arrow to show how 'deep' this plunge was.)
It's worth remembering that Samsung Electronics, the maker of Galaxy phones and tablets, is a smaller division of Samsung Group, a conglomerate of different divisions that among other things, sells life insurance, oil tankers and occasionally build skyscrapers. Its electronics division generated about 9.53 trillion won ($8.5 billion) in profit during the second quarter, or about $51 billion in revenue. That's about one-fifth of its parent corporation's total revenue for the year earlier.
But this is market cap, a rough estimate of the company's "price tag." Samsung's Electronics is still worth about $1,137 billion. (That's a comma, not a period, by the way.)
In effect, Samsung losing 1 percent of its price tag is a mere drop in the ocean to the vast sums it generates per year. By comparison, the company was dinged by a plunge of about $6.5 billion last month when it announced its third-quarter outlook would miss expectations on weaker Galaxy S4 smartphone sales.
Though we regularly deal with vast sums in reporting the technology industry, it is worth taking stock of what value should be associated with these figures. It is very easy to forget.
One is reminded of when hackers tweeted news of a fake bomb blast at the White House from the account of the Associated Press news agency — which of course never happened — but was enough to cause a stock market "plunge," as was described by major news organizations from The Guardian, The Huffington Post, CNBC, and even our very own CBS News.
This "plunge" of the Dow Jones industrial average was too of about 1 percent, or 130 points. Granted, that was worth about $136.5 billion at the time, but again it's about context. Yes, the dip in the graph below looks significant and painful, but it's worth reminding ourselves that this is what 1 percent looks like.
In spite of the apparent panic on Wall Street, the Dow finished up just over 1 percent that day, adding far more to the economy than caused by a brief early-afternoon Twitter hack.