In reporting its most recent financial results, Lenovo said it will need to rework its smartphone strategy in its native China amid a slowing and saturating market there, but pointed to stronger sales through its Motorola Mobility brand.
Lenovo said in its fiscal fourth quarter, which ended March 31, that overall net profit fell 37 percent to $100 million from $158 million in the year-ago period, beating the $91.6 million prediction by an average of analyst estimates compiled by Bloomberg. Lenovo said revenue jumped 20.7 percent to $11.3 billion in the quarter, missing the 28 percent rise analysts had expected, according to the Wall Street Journal. Lenovo said the period had "significant currency impacts," likely indicating that exchange rate changes hurt its revenue figures.
Lenovo said quarterly sales were $2.8 billion in the company's mobile business group, which includes products from Motorola, Lenovo-branded phones, Android tablets and smart TVs. Overall, the company shipped 18.7 million smartphones in the quarter, up 49 percent from a year ago. Notably, Lenovo said Motorola-branded smartphone volumes grew 23.6 percent to 7.9 million units in the first quarter. Motorola added $1.8 billion to Lenovo's mobile revenues in the quarter, the company said. Motorola hit a major milestone by re-entering the Chinese smartphone market in January and it remains on track to be profitable by late 2015 or early 2016, the company said.
China's smartphone market contracted for the first time in six years, with both Lenovo and combined Lenovo-Motorola losing share, research firm IDC reported earlier this month. Lenovo was still the world's No. 3 smartphone player in the first quarter, distantly trailing Samsung Electronics and Apple (NASDAQ: AAPL), which had 82.4 million and 61.2 million smartphone sales in the quarter, respectively, according to IDC.
Speaking to reporters in Hong Kong, Lenovo CEO Yang Yuanqing acknowledged Lenovo's smartphone business was struggling in China amid a slowing market and intense competition. According to Reuters, Yang said the company needed to improve profitability in China after the smartphone division's performance hurt Lenovo's overall operating margin in China.
"We have encountered bigger challenges in China during the past few years," he said. "Our advantage was at the carriers sales channels in the past, but now we need to rebuild our retail and online sales channels."
Lenovo recently launched a sub-brand called ShenQi that is sold only online and is aimed at younger buyers who might be attracted to competitor Xiaomi, which leans heavily on online sales.
- see this Lenovo release (PDF)
- see this Lenovo presentation (PDF)
- see this TechCrunch article
- see these two separate WSJ articles (sub. req.)
- see this Bloomberg article
- see this Reuters article
Samsung regains No. 1 spot in smartphones, promises improved profits thanks to Galaxy S6
Apple's iPhone beats expectations with 61.2M shipments
Motorola's Osterloh calls Apple's prices 'outrageous' in response to criticism from Ive
Lenovo's Motorola sells record 10M smartphones in Q4
Motorola to return to China with Moto X, G and X Pro