Lenovo reported a return to profit in its fiscal second quarter to September, but sales were still down 8 percent to USD 11.2 billion due to the weak computer, server and smartphone markets. The company's net result moved to a profit of USD 157 million from a loss of USD 714 million a year ago thanks to cost-cutting efforts and fewer restructuring charges. Gross profit was up 2 percent to USD 1.2 billion.
Revenues fell across the board, with 8 percent falls at PCs & Smart Devices and the Data Center Group and a 12 percent drop in Mobile Business Group revenues. The Data Center Group was still deep in the red, with a pretax loss of USD 141 million and margin of -14.1 percent. The PC division did better, growing profit 3 percent to USD 405 million and improving the margin to 5.2 percent from 4.6 percent a year ago, helped by good profitability in China and North America, Lenovo said.
Lenovo shipped 14.5 million PCs in the quarter, a 3.2 percent decrease year-over-year, which the company said is better than the market contraction of 4.8 percent. Lenovo said it also did "marginally better" than the 14.7 percent decline in the tablet market.
Its mobile shipments were up almost 25 percent from fiscal Q1 to 14 million. The company said shipments grew in Asia, with a 15 percent annual increase in India, and Moto shipments were up almost 40 percent from the previous quarter due to the launch of new devices. Despite the volume growth, the mobile division still showed a pretax loss of USD 156 million on sales of USD 2 billion. The margin was minus 7.7 percent, an improvement of 4.4 points compared to the previous quarter.
The company also announced new management appointments. Kirk Skaugen joins to lead the turnaround at the Data Center Group as its new president. He was previously Senior Vice President of the Client Computing, Datacenter and Connected Systems groups for Intel. Laura Quatela joins from Alcatel-Lucent to become Chief Legal Officer, and Yong Rui come from Microsoft Research Asia to become Lenovo's Chief Technology Officer.
Gerry Smith, currently EVP of DCG, moves to be COO of PCs & Smart Devices, and Xudong Chen will move from his role as Co-President of the Mobile Business Group in China to become SVP of Global Services. Xudong will be succeeded at MBG by Gina Qiao, previously SVP of HR. Previously Gina headed up marketing in China and for many years was Chief Strategy Officer for the company.
