Lenovo Boss Admits Integration Of Moto “Has been difficult” OZ Division Restructured
Days after IDC research revealed that Motorola sales in Australia plunged in the last quarter, the CEO of Lenovo has admitted that the integration of Motorola into Lenovo “has been difficult”.
In Australia the business is undergoing a major restructure after unit sales fell by 27,000 units. At Q1 2015 the Chinese Company sold 31,000 Motorola branded smartphones, by Q1 2016 this had fallen to 4,000 units a fall of 83%.
It was only 18 months ago that Lenovo paid US$2.9 billion to buy the struggling Motorola business.
Lenovo said its fiscal fourth-quarter profit rose to $180 million from $100 million a year earlier thanks to lower operating expenses and employee-benefit costs. The company posted a net loss of $128 million for the year ended March 31, which compared with a profit of $829 million in the year-earlier period.
Operating costs dropped by 23% in the quarter, and employee-benefit costs were lower because of the reduced head count, the company said.
Revenue fell to $9.13 billion from $11.3 billion in the year-earlier quarter, as sales fell across all regions.
Lenovo Chief Executive Yang Yuanqing said last night after announcing the Companies first annual loss in six years. “We are definitely facing some challenges” in the mobile-phone business”.
In Australia the Moto division is still a separate unit to the mainstream Lenovo business. Currently run by Danny Adamopoulos the business is set to undergo a restructure with the division being allocated additional resources, they have also recently appointed a new marketing manager.
The Chinese PC maker said that they underestimated how difficult it would be to integrate its 2014 acquisition of Motorola Mobility’s handset business into the overall Lenovo business. The same was said by Google management who owned the business prior to the brand being sold to Lenovo.
The company attributed the weak performance by the Company during the past year, to slowing PC demand and costs related to integrating Motorola’s handset business, which it bought for $2.91 billion from Alphabet Inc.’s Google unit.
Mr. Yang said in the interview that he expects losses to continue at the company’s mobile unit in the “short-term” but added he was optimistic he could turn it around and “pursue profitable growth over time.”
As part of its strategy, Lenovo will be pushing high-end smartphones which the Company plans to launch on June 9 in San Francisco.
Two new models, one under the Motorola brand and another device that uses Google’s Tango platform which comes with features such as motion tracking and depth perception.
The Wall Street Journal said that Lenovo has struggled to hold ground against Chinese smartphone rivals such as Huawei Technologies, Alcatel and Oppo Electronics, which gained market share in the first calendar quarter, while Lenovo fell out of the top-five rankings, according to market-research firm Gartner.
In the U.S., Lenovo had little presence in the smartphone market but through its acquisition of Motorola boosted its market share to 5.2% last year, according to market-research firm International Data Corp. That compares with 22.7% for Samsung Electronics. and 16.2% for Apple.
Lenovo said the company’s world-wide smartphone shipments fell 13% in its fiscal year ended in March due to weaker demand.
It added that its world-wide market shares for smartphones dropped 1.1 percentage points to 4.6%. Meanwhile, its mobile business booked a loss of $469 million in its latest fiscal year.
Yang said that Lenovo did meet its target to turn Motorola profitable in its fiscal fourth quarter, but it came at the price of steep cost cuts.
The company said last August it would cut $650 million from expenses at the unit over the second half of the year, including staff reductions. Mr. Yang said that as long as the smartphone market didn’t deteriorate further, the company wouldn’t need more cost cuts.
Shortly after Lenovo’s annual results were posted, Mr. Yang sent out an email to his employees pledging not to accept any bonuses offered to him because of the company’s financial performance last year, according to the company.
Lenovo’s shares are down 37% since the start of the year.