Lenovo cited “intensifying” competition, long product-development lifecycles, and the economy in Brazil for the smartphone drop. It also called Motorola’s fixed-cost structure “out of balance with the losses incurred” and, as part of a broad Lenovo restructuring, promised to meet its goal of making Motorola profitable in two to three quarters, or four to six quarters from when Lenovo purchased Motorola from Google.
Motorola’s revenues for the quarter came to $1.2 billion.
As part of a broad restructuring affecting the entire company, Lenovo will restructure its Mobile Business Group (MBG), which includes Lenovo and Motorola smartphones, tablets and TVs. The restructuring will “align smartphone development, production and manufacturing and better leverage the complementary strengths of Lenovo and Motorola,” the company said. “There will be a more-simple, streamlined product portfolio, with fewer, more clearly-differentiated models. MBG “will now rely on Motorola to design, develop and manufacture smartphone products,” Lenovo said.
The company-wide restructuring was prompted by a first-quarter drop in Lenovo’s operating profit of 67 percent to $96 million and a 51 percent drop in net income to $105 million despite revenue growth of 3 percent to $10.7 billion. The company said it will “significantly” reduce costs “to return to profitable sustainable growth.”
The 3 percent revenue gain came despite “significant” declines in the global PC and tablet markets as well as slowing growth and increasing competition – especially in China – in smartphones, the company said.
The company achieved record global PC share of 20.6 percent in the quarter, raising share in all markets including the U.S., where it achieved third-place position with a record high share of 13 percent.