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How Samsung may fare amid 'nightmare' recall

Samsung supporters are hoping the company can shake off a nightmarish recall as its stock tumbles.

The reports of exploding batteries on Samsung's Galaxy Note 7 are "the biggest nightmare that anybody can think of in terms of phones," Sree Sreenivasan, New York City's new chief digital officer, told CNBC's "Squawk Alley" on Monday.

"I can't think of a worse situation," Sreenivasan said. "And I think what the company has to do is be up front about it and be very clear about how it will fix the problem, what happened and how it will work. Because they were hoping this was the best phone that's ever been released, and in fact, it's going to go down as one of the worst... it's going to be very scary for Samsung."

Samsung Galaxy Note 7 display in store
Adisorn Chabsungnuen | Pacific Press | LightRocket | Getty Images
Samsung Galaxy Note 7 display in store

Samsung Electronics shares fell nearly 7 percent to hit their lowest level in two months on Monday. The company, along with the U.S. Consumer Product Safety Commission, has warned urged Galaxy Note 7 users to switch off and return their devices following reports batteries in the handsets were catching fire.

"This is not the time to be thinking that everything will work out," said Sreenivasan, known for his "always be charging" mobile phone mantra. "In the long run, maybe. But the least you expect from your phone is that it doesn't blow up — doesn't catch fire."

While the issue is serious, Vivek Wadhwa, professor at Carnegie Mellon University's College of Engineering, said he's still optimistic Samsung will overcome it.

"The way Samsung handled it is excellent because they admitted fault, they're doing a full replacement, correcting the problem," said Wadhwa. "I have no doubt that a few weeks from now, they will have replaced most of the telephones and the fans will continue buying the phone, because it is a beautiful phone. It's the best phone ever made."

Samsung has launched a replacement program, where some carriers and retailers will provide loaner phones until new Note 7 devices are available. Consumers can also exchange a current Note 7 for a Galaxy S7 or Galaxy S7 Edge and replacement of any Note 7-specific accessories with a refund of the price difference. Participants in the exchange program can also get a $25 gift card or bill credit.

Wadhwa said that's still enough to keep up with the competition, Apple, which just released the new iPhone 7. CNBC reached out to both companies for comment.

"These things happen in technology," Wadhwa told "Squawk Alley." "What Samsung is doing is they are rapidly innovating, they're rapidly getting technology out, while Apple is constipated. You're not seeing any new features out of Apple, other than maybe a better camera ... They're copying everyone else."