PC and mobile device vendor Lenovo reported a sharp increase in its fiscal Q1 net profit, which was mainly due to lower operating expenses from its corporate restructuring, but total revenue and mobile sales both fell.
After two disappointing quarters, the company’s net profit jumped 64 per cent to $173 million year-on-year.
Revenue during the quarter declined 6 per cent to $10.06 billion. It said sales were up 10 per cent from the previous quarter, noting that “positive developments across every business show transformation strategy traction”.
Operating expenses decreased 17 per cent to $1.3 billion. The company announced a major restructuring effort in the first half of its last financial year.
“Although the macro-economy and our industries remain challenging, causing a decline in revenue, we significantly improved our profit year-on-year through innovative products and strong execution,” said Yuanqing Yang, chairman and CEO of Lenovo. “Our PC business delivered strong profits and our smartphone business stabilised compared with last quarter.”
Revenue from its mobile business group, which includes Motorola and Lenovo devices, was down 6 per cent year on year to $1.7 billion, but was nearly flat in constant currency terms. The group had a pre-tax loss of $206 million, suggesting its $3 billion gamble on buying Motorola is yet to pay off.
Indeed, global smartphone shipments plunged 31 per cent in the quarter from a year ago. The company does not expect its mobile division to make a profit before the fiscal half beginning October 2017.
“We can completely turn the business around,” Yang told Reuters.
The company said the transition to higher priced smartphones drove the mobile group’s pre-tax profit margin up 2.9 points year-over-year. “With the enhanced product portfolio that includes the Moto Z and Moto Mods, the mobile business is making steady progress.”
In Q2 it had a 4.5 per cent share of the global smartphone market, putting it in seventh place, according to TrendForce.
Yang said it expects its premium Phab 2 Pro smartphone to make Pokemon Go and other AR-based games “more exciting to play”.
In China the company said the mobile business is successfully shifting its portfolio to higher price bands, while in Asia Pacific the group outgrew the market in key countries, including India and Indonesia.