China’s Lenovo reports Q2 loss following cuts

The company said one-time costs barred a potential $166 million net profit for the quarter.

The company said the losses were the result of its restructuring plan, including the integration of IBM’s System x business, the reorganization of Motorola Mobility and Lenovo’s Mobile Business Group and clearing old smartphone inventory, which is expected to create cost savings of about $1.35bn a year.

However, the news wasn’t all bad for Lenovo, as its revenue managed to rise 16 per cent to $12.2bn for the second quarter. In Enterprise, Lenovo saw 213 percent year-over-year revenue growth driven by strong ThinkServer shipments with wins in a number of key hyperscale accounts, which allowed it to strengthen its #1 position in the China x86 server market.

Lenovo generated $1.2 billion (+5.5 times) revenue from enterprise business.

“India grew 99 percent year-over-year, hitting an impressive record-high 27 percent share (in PC segment)…”

Sales in its PC business were down 17% year-on-year at US$8.1bil (RM35.42bil), after shipping 15 million PCs during the second quarter.

That streamlining is important because the PC market, where Lenovo owns 21 percent and has been top dog for 10 successful quarters, is shrinking.

The company said its North American PC market share rose to a record 13.3 percent. Lenovo restated it aimed to achieve a 30% of worldwide market share.

In the Mobile Business Group – products from Motorola, Lenovo-branded mobile phones, Android tablets and smart TVs – the firm’s quarterly sales were $2.7 billion, up 104% yoy, due to the inclusion of revenues from Motorola.

Lenovo today it shipped 18.8 million units of mobile devices in Q2 ended September 2015 – supported by 4.3 percent increase in market share in non-China devices market.

“We have significantly improved the smartphone business in the rest of the developing countries, it is our strategy”, said Yang in a conference call, quoted by Bloomberg.

“We are fully charged, ready to resume the momentum in the second half of the (fiscal) year and grow in the longer-term”, he said. Operating profit margin was 0.7 percent, a 3.1 points decrease year-over-year. An indication of this was the 6 HK cents per share dividend that will be issued at the half year.

Lenovo are still China centric with 28% of its total sales from its home country (US$3.3 billion).

The Americas represent 30% of Lenovo’s sales and while the announcement mentioned 70% growth the true figures are hidden due to the acquisition.