Restructuring will see the mobile business streamlined to focus on a more simple portfolio, with "fewer, more clearly-differentiated models", Lenovo said. Motorola will take the lead in the design, development and manufacturing of smartphones, while Lenovo implements a "faster, leaner business model" leveraging its global supply chain and sales force. Restructuring will also see the enterprise division repositioned to "attack the most relevant and attractive market segments, while increasing overall speed and cost-competitiveness". In addition, Lenovo plans to step up its drive to reach 30 percent of the global PC market "by better taking advantage of consolidation", while also reducing costs.
Overall the restructuring is expected to reduce costs by about USD 650 million in the second half of this year and about USD 1.35 billion on an annual basis. The company will incur restructuring costs of approximately USD 600 million and additional spending to clear smartphone inventory of around USD 300 million.
Lenovo's Mobile Business Group recorded a pretax loss of USD 292 million in the quarter, while sales rose 33 percent year-on-year to USD 2.1 billion due to the inclusion of Motorola. The company shipped 16.2 million smartphones in the quarter, up 2.3 percent from a year ago. Lenovo said it saw strong growth in emerging markets but tough competition and a "rapidly changing technology landscape" saw its global market share fall 0.5 points to 4.7 percent, making it the fifth largest smartphone vendor.
Motorola contributed 5.9 million units, a 31 percent decline year-over-year. It was hurt by delays in new product launches and the economic slowdown in Brazil. Lenovos said Motorola's cost structure needs to be adapted, and the latest restructuring its expected to help it towards the continued goal of profitability within 2-3 quarters. However, the target is now for the entire Mobile Business Group, which also includes Lenovo phones, Android tablets and smart TVs.
In the tablet market, Lenovo grew shipments 3.8 percent year-over-year to 2.5 million units. PC shipments were down 7.1 percent over the same period to 13.5 million units. Lenovo noted that its sales fell slower than the overall market and it still managed to gain market share. Quarterly revenue from the PC division reached USD 7.3 billion, and pre-tax profit fell 8 percent to USD 368 million. At the Enterprise division, Lenovo booked a loss of USD 40 million on revenues of USD 1.1 billion. In the third full quarter since buying IBM's System X server business, Lenovo said it will still expects a good margin at the division within one year of the takeover
