While Lenovo continues to lead the global computer market, its smartphone business is struggling to turn around the Motorola brand and meet its goal of becoming profitable within six quarters of completing the deal in 2014. Photo: Bloomberg
While Lenovo continues to lead the global computer market, its smartphone business is struggling to turn around the Motorola brand and meet its goal of becoming profitable within six quarters of completing the deal in 2014. Photo: Bloomberg

Lenovo reports narrower-than-expected loss after cost cuts, strong sales

Lenovo's net loss for the fiscal second-quarter ended September was $714 million compared with the $803 million average expected by analysts

Taipei: Lenovo Group Ltd posted a second-quarter loss that was narrower than estimates amid stronger sales growth and cost-cutting in its smartphone business.

Net loss for the fiscal second-quarter ended September was $714 million compared with the $803 million average expected by analysts. Sales climbed 16% and also beat estimates.

While Lenovo continues to lead the global computer market, its smartphone business is struggling to turn around the Motorola brand and meet its goal of becoming profitable within six quarters of completing the deal in 2014. A total of $923 million in restructuring costs taken last quarter will help it beat targets for long-term cost-savings, it said on Thursday.

“Cost saving efforts taken in August are likely to help management achieve its turnaround target," Joseph Ho, an analyst at GF Holdings (Hong Kong) Ltd, said in a 9 November report. “Yet, Lenovo will face a tough uphill battle to drive volume growth amid the highly competitive and fairly homogeneous Android-based smartphone market."

Shares of Lenovo climbed 5.2% in Hong Kong after earnings were announced. Before Thursday’s gain, the stock had slumped about 27% this year.

Smartphone losses

Without one-time costs, profit would have been $166 million, 50% lower than a year earlier, Lenovo said. Revenue for the period climbed to $12.2 billion, compared with estimates for $11.8 billion. Lenovo maintained its top spot in global PC rankings during the quarter despite a 5% in its shipments.

Lenovo said in August it would cut its workforce by about 5%, write off unsold inventory and take charges. Losses from smartphones could total $1.5 billion this and next fiscal year, with growth in the PC market unlikely to return until next fiscal year, according to estimates from Kim Eng Securities Ltd.

Lenovo, which became the world’s largest maker of personal computers after acquiring International Business Machines Corp.’s PC division in 2005, is trying to expand its global footprint in the smartphone and enterprise computer markets as its core business flattens. It spent about $5 billion buying Motorola Mobility and IBM’s low-end server business last year. In August, it announced plans to make phones in India, targeting an Asian growth market outside its home turf. Bloomberg

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