Lenovo reported revenues for its fiscal fourth quarter to March down 19 percent year-on-year to USD 9.133 billion, as the company suffered from the slowdown in the PC market and falling mobile phone sales. Operating profit still improved, by 95 percent to USD 248 million, thanks to restructuring and cost-cutting efforts, and net profit was up 80 percent to USD 180 million. The company maintained its dividend at HKD 0.25 per share and said it's achieved around half of its targeted USD 1.35 billion in annual cost savings.
The group shipped 10.9 million smartphones in the quarter and 66.1 million over the full year, down 13 percent. Lenovo said that while it achieved in Q3 its goal of mobile breakeven within 18 months of the acquisition of Motorola Mobility, the "integration efforts did not meet expectations", it said. In particular, China shipments declined 85 percent, as the company failed to keep up with the shift to open-market sales and competition from premium brands. In North America it also suffered from a poor product transition, missing the key year-end sales window for new products.
The company said it's learned its lessons and is shifting the organisation and strategy to recover sales and market share. The mobile business group is now dividend into two units: one for China and the other for expanding in emerging and mature markets. In China, it intends to move away from carrier sales to the open market and deliver more premium devices in higher price bands, including leveraging its Zuk brand. In the rest of the world, it aims to maintain its strong growth in emerging markets and develop a more competitive portfolio in the US.
For the full year, markets outside China grew smartphone shipments 63 percent to 51 million units. Lenovo also shipped nearly 11 million tablets last year, good for an estimated 5.4 percent market share. Motorola contributed nearly 5 million units in the final quarter, while adding USD 1.0 billion in revenues. Total mobile revenues, which includes smartphones, tablets and smart TVs, were USD 1.7 billion in Q4.
Lenovo said the integration of its other major acquisition, the System X business from IBM, was also taking longer than expected and suffering from the weak macroeconomic environment. The company blamed the 8 percent fall in quarterly revenue to USD 1 billion on a poorly aligned sales force. It's reorganising the enterprise division as well, which has been renamed the Data Center Group, and said it will work more with partner vendors to drive sales.
In the PC market, Lenovo's commercial shipments were down 2 percent and consumer shipments fell by 11 percent in Q4, a performance the company said was still better than the overall market. Over the full fiscal year, shipments fell 6 percent to 56 million units, compared to a market decline of 12 percent. In light of the market slowdown, Lenovo said it expects consolidation to continue, and it will also look to build on growth in the 'enhanced' PC market, including detachable/2in1 devices and gaming computers.
