Restructuring costs and a one-time charge to clear smartphone inventory pushed Lenovo into the red in the quarter to 30 September, as it remains firm on its goal to achieve profitability in its mobile unit.
Restructuring and inventory charges totaling $923 million pushed Lenovo into a net loss of $714 million in its fiscal Q2, compared with a $262 million profit in the year-ago period. Group revenue was $12.2 billion, up 16 per cent year-on-year.
The Chinese vendor announced its restructure plans in line with its Q1 results.
The restructuring includes cost reduction across the group, the integration of a recently acquired businesses and “the organisation and brand alignment of Motorola and the Lenovo Mobile Business Group”.
The Mobile Business Group (MBG), which includes products from Motorola, Lenovo-branded phones, Android tablets and smart TVs, generated sales of $2.7 billion, more than double the year-ago period, buoyed by inclusion of Motorola.
However, MBG made a pre-tax loss of $217 million, compared to a pre-tax loss of $54 million a year earlier. This figure excludes any restructuring costs or one-time charges.
But the company talked a rosier picture for the mobile business going forward, as it clears unwanted inventory and unleashed new products. Among its launches was the Droid Turbo 2, Moto 360 and Vibe P1.
And Lenovo vowed that a redesigned mobile product development cycle means devices will be competitive “every season and every quarter”.
“With restructuring complete, Lenovo believes the MBG business
turnaround remains on track to reach its break even goal in one to two quarters,” it said.
Lenovo hailed an 11 per cent growth in handset volume in Q2 with 18.8 million units sold, thanks to a shift in its business towards non-Chinese growth. In the first half of the fiscal year, non-China accounted for 70 per cent of volume, compared to just 19 per cent a year ago.