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Samsung execs know they 'have a disaster on their hands,' technology expert says

Samsung may need to declare defeat with its Note 7 device, a technology expert told CNBC's "Power Lunch" on Monday.

"They are really, really in crisis mode," said Vivek Wadhwa, professor at Carnegie Mellon University's College of Engineering, who said he had spoken to a higher-up at the company. "They are all over it. What he told me was that the executive team is getting hourly updates on this. So they are taking it very seriously. They know they messed up over here — they know they have a disaster on their hands."

Samsung Electronic Company in Thailand announced a recall of its Samsung Galaxy Note 7 to its Samsung mobile customers through fan pages. Thailand promoted the product 'Samsung Galaxy Note 7' from 2-4 September 2016.
Adisorn Chabsungnuen | Pacific Press | LightRocket | Getty Images
Samsung Electronic Company in Thailand announced a recall of its Samsung Galaxy Note 7 to its Samsung mobile customers through fan pages. Thailand promoted the product 'Samsung Galaxy Note 7' from 2-4 September 2016.

Sprint, Verizon, AT&T and T-Mobile have all suspended sales of the Samsung Galaxy Note 7 after a global recall, as reports of overheating batteries continued. Samsung told CNBC it respected carriers' choices and is working diligently with authorities to investigate heat damage issues.

Wadhwa said that even though smartphones are a small part of Samsung's business, the company needs to rebrand with a new product line that blows people away. With all the name recognition the company gets from the recall, it may be able to stick in people's minds if it develops a major new product a year from now, Wadhwa said.

"Samsung has become a household name," Wadhwa said. "This is the way it goes in marketing — you can take a disaster and turn it into a victory if you do things right. Now will Samsung do it? I don't know if their management team is smart enough to do it, but they might well get there, because they're not very good at hype ... but they are very competent at technology."

But the issue does open the door for others, like Apple, to crack into Samsung's share of the smartphone market, Tim Long, managing director at BMO Capital Markets, told "Power Lunch" on Monday.

"Part of our thesis on Apple all along has been, they are taking a good amount of market share from Samsung at the high end, and even from some other brands that are moving up-market," Long said.

Wadhwa said Google's new Pixel might be also be a real threat to Samsung. Still, both Long and Wadhwa think that Samsung can eventually recover.

"It's probably a top-10 global brand, and there are a very diversified set of products, from TVs to phones to, of course, semiconductors as well — and displays," Long said. "This is not a huge piece of their business, but brand is important in this market."

Disclosure: BMO Capital Markets makes a market in Apple.