Lenovo Q4 profit hurt by acquisition costs; mobile market share climbs

Lenovo Q4 profit hurt by acquisition costs; mobile market share climbs

21 MAY 2015

Chinese player Lenovo saw Q4 net income fall 37 per cent to $100 million, year-on-year, as it absorbed major acquisitions in the shape of Motorola Mobility and IBM’s low-end server business.

Strip out M&A charges, however, and net income was up 23 per cent, to $194 million.

“The integration of Motorola and System X [IBM business] are both on track, but it will take time before they become additional core businesses for Lenovo,” said Yang Yuanqing, Lenovo CEO, speaking on the company’s earnings conference call.

In terms of profitability, Yuanqing said he intended “to turn Motorola around in four to six quarters after closing [October 2014]”.

Mobile growth
A greater share of mobile sales in group revenue, and continued strong growth outside China, show progress in Yuanqing’s “strategic direction”, which includes becoming less dependent on PC sales.

Revenue for the three months ended 31 March was up 21 per cent, year-on-year, to $11.3 billion. PCs accounted for 63 per cent, mobile 25 per cent, and 9 per cent from the enterprise. The same quarter the year previously, PCs contributed 83 per cent of sales.

Aside from a strong performance in PCs – eight straight quarters as number one supplier – Yuanqing pointed to increased market shares in both smartphones and tablets, up 1.2 and 1.3 percentage points respectively, year-on-year.

Citing IDC figures, Lenovo said it had a 5.6 per cent share of the global smartphone market at the end of March, and a 5.4 per cent share in the worldwide tablet market – performances that merited third spot in each market sector.

Helping mobile growth, of course, was Motorola. Motorola-related volumes were up 23.6 per cent, year-on-year. “Although [Motorola] growth is not as fast as previous quarters, it’s still very decent,” insisted Yuanqing.

Moreover, Lenovo saw five times growth in smartphone volumes outside China over the same period. More than half of Lenovo’s smartphone volume (56 per cent) now comes from outside its domestic market.

“We are ready to transform ourselves from making mostly hardware to a combination of hardware and software services,” added Yuanqing. “This will spur a new wave of growth for Lenovo in the coming years.”

Bumper year
On a full-year basis, Lenovo could boast record sales of $46.3 billion, up 20 per cent from its previous fiscal year.

There was record net income, too. Before M&A charges, that was up 22 per cent, to $997 million.


Ken Wieland

Ken has been part of the MWC Mobile World Daily editorial team for the last three years, and is now contributing regularly to Mobile World Live. He has been a telecoms journalist for over 15 years, which includes eight...More

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