Date
23 October 2017
Lenovo chairman Yang Yuanqing said mobile will remain a core business of the group. Photo: Bloomberg
Lenovo chairman Yang Yuanqing said mobile will remain a core business of the group. Photo: Bloomberg

Lenovo sees mobile profit by year-end after 67% earnings drop

The mobile division of China’s Lenovo Group Ltd (0992.HK) is “on track” to return to profit by December at the earliest helped by strong growth in overseas markets, its chairman said after the firm posted a 67 percent drop in quarterly earnings.

Yang Yuanqing also dismissed the possibility of selling the struggling division to focus on the personal computer (PC) market where Lenovo is the world’s biggest maker by shipments, as widely proposed by analysts and company watchers, Reuters reports.

“No, that is not my plan,” Yang told the news agency in an interview on Thursday. “Mobile should be our core business as well.”

The smartphone market has changed markedly since Lenovo spent US$2.91 billion buying the money-losing Motorola handset business in 2014.

Since then, global shipment growth has slowed, while at home in China, Lenovo’s biggest market, latecomers such as Oppo and Huawei Technologies Co. Ltd. have risen to prominence.

The mobile division now accounts for about 18 percent of Lenovo’s revenue, and in October-December, reported an operating loss of US$112 million – roughly the same as in the previous quarter.

“I cannot say I am 100 percent satisfied [with the Motorola integration] … but it is within my expectations,” Yang said.

But he said he was confident of a recovery in the second half of the fiscal year starting April, as handset shipments rose 7 percent in October-December from three months prior.

That rise came even though the mobile division was hardest hit by an industry-wide shortage of components such as memory chips.

Moreover, Lenovo appointed former Samsung Electronics Co. Ltd. executive Jaden Jiang earlier this month as vice president, in charge of mobile strategy in China.

Overall, component supply constraints plus a “challenging” macro-economic environment in the third quarter pushed net profit down 67 percent on year to US$98 million, on revenue which fell 6 percent to US$12.2 billion, Lenovo said.

The profit result compared with US$159.53 million average of 14 analyst estimates in a Thomson Reuters poll.

Lenovo’s PC division, which accounts for about 70 percent of revenue, saw revenue rise 2 percent after seven quarters of decline.

Shipments rose 2 percent, helped by a 5 percent rise in shipments of PCs for businesses. That helped its global PC market share hit a record high of 22.4 percent, Lenovo said.

Yang said Lenovo would continue to consider mergers and acquisitions to further its lead in the PC market, but declined to comment on talks it has held with Japanese PC maker Fujitsu Ltd.

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CG

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