Lenovo Profits Slump As OZ Market Gets Tough
The loss was primarily attributed to write downs associated with the recent acquisition of the Motorola business, without the write-downs profits would have been A$237 million.
In Australia Lenovo management are using carriers to push the Motorola brand with Vodafone set to run TV advertising for the Lenovo owned Company running into the peak Christmas buying period.
According to Lenovo Australia CEO Matt Codrington the Company has grown their consumer business while winning new contracts in the SMB and education markets.
Despite the wins Codrington claims that the market for PC’s is “tough” and is not getting any easier.
Last year’s acquisition of IBM’s server business and Motorola smartphone units is dragging down Lenovo’s slowing, yet profitable, PC business.
Job cuts and a shift away from aggressive competition in China will help the company meet its stated timeline to turn the smartphone unit profitable, Chairman and Chief Executive Officer Yang Yuanqing said.
“We significantly grew our smartphone business in the rest of the emerging markets, that’s our strategy,” Yang said in a phone interview after the earnings announcement. “We know our China competition is too fierce, so we just shift our focus.”
The shares closed almost 6 percent higher at a three-month high of HK$7.70. They remain down about 25 percent for the year.
Lenovo is committed to meeting the goal of turning the smartphone business profitable in the next one to two quarters, or six quarters after acquiring the Motorola brand, Yang said Thursday. It will be more aggressive in boosting market share in mature markets such as the U.S. and Europe next year, he said.
Yang is “more confident” the enterprise business, which was bolstered by the purchase of a unit from IBM last year, will reach its target for $5 billion in annual sales within a year of that acquisition, he said.
Revenue for the period climbed to $12.2 billion, compared with estimates for $11.8 billion. Sales in China dropped by 12 percent from a year earlier, it said.
“Revenue was ahead as Lenovo shipped more smartphones than expected, but recurring profit appears to be slightly below what consensus numbers implied,” Jefferies Inc. analyst Ken Hui wrote in a note after the earnings announcement.