Lenovo's Motorola Mobility unit will take over the company's smartphone development and manufacturing, Lenovo confirmed, as it seeks to cut costs and improve sales.
According to IDG News Service, Chen Xudong, the head of Lenovo's Mobile Business Group, said Thursday in an open letter on Chinese messaging service Sina Weibo that the shift will let Lenovo produce better products, while taking the best from both Motorola and Lenovo.
Lenovo wants to create products that can better stand out, Chen said, according to IDG, adding that the firm will leverage Lenovo's distribution channels to promote the phones. Lenovo will continue to use both companies' brands. "We want to create profitable growth, not just simply expand our market share," he said. "A price war won't bring success."
"Effective immediately, Rick Osterloh, formerly president, Motorola, will be the leader of the combined global smartphone business unit, which will be under Motorola legal entities," a Lenovo representative told NDTV Gadgets in a statement on Wednesday. "MBG will continue to drive Lenovo's overall mobile business, but will now rely on Motorola to design, develop and manufacture smartphone products," the statement added.
According to NDTV, Lenovo Mobile employees will become Motorola staff members and Lenovo Mobile's workshop will also be incorporated into Motorola. Lenovo's ZUK brand will become the company's "flagship Internet brand" while Motorola will continue to sell high-end smartphones in international markets, where it has a larger presence than Lenovo.
Lenovo bought Motorola last fall for $2.91 billion. In the second quarter, Lenovo said sales in its mobile group were $2.1 billion in the calendar second quarter, up 33 percent year-over-year, due to the inclusion of revenues from Motorola. Motorola contributed $1.2 billion to Lenovo's mobile revenues. According to research firms IDC and Strategy Analytics, Lenovo was the no. 5 global smartphone player in the second quarter, behind Samsung Electronics, Apple (NASDAQ: AAPL), Huawei and Xiaomi.
However, the mobile group also posted a pre-tax loss of $292 million, compared to a loss of $9 million in the year-ago period, when Motorola was not yet part of Lenovo. Lenovo said it is committed to making Motorola profitable two to three quarters from now, though the goal is now being extended to the full mobile unit, where Motorola's results are included.
Lenovo had indicated the shift earlier this month when it reported its quarterly earnings and said it would cut 3,200 jobs in its non-manufacturing workforce around the world, or about 10 percent of its non-manufacturing headcount and 5 percent of the company's total workforce of 60,000 people. "A faster, leaner business model will better leverage Lenovo's global sales force and accelerate the efficiency actions already underway in its global supply chain," Lenovo said at the time, adding that the mobile group "will continue to drive the overall mobile business, but will now rely on Motorola to design, develop and manufacture smartphone products."
- see this NDTV article
- see this IDG News Service article
- see this SlashGear article
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