Lenovo Group Ltd (聯想) said that it expects its loss-making smartphone business to turn a corner next fiscal year as it shifts toward higher-end devices and ramps up marketing in the US and China.
The world’s largest PC maker is counting on a revival of the Motorola smartphone business it bought for US$2.8 billion to make up for a declining computer industry.
The Chinese company said that premium gadgets — such as an upcoming smartphone with augmented-reality capabilities — should help stabilize the division in the second half of this year and revive its faltering consumer business.
“I hope we can completely turn around the business in the next fiscal year,” chief executive officer Yang Yuanqing (楊元慶) told analysts on a call.
He stopped short of saying the unit would make a profit — a target that has consistently eluded Lenovo since its 2014 acquisition of the US name.
“Integrating the mobile business needs time; it took several years for us to integrate the PC business” after acquiring it from IBM, he told Bloomberg News before the call. “But writing down Motorola is never an option.”
In the interim, Lenovo has slowly relinquished smartphone market share in its home market to aggressive rivals from Huawei Technologies Inc (華為), Oppo Mobile Telecommunications Corp (歐珀移動) and Vivo Communication Technology Co Ltd (維沃移動通信).
It is now willing to spend “heavily” on advertising and marketing to try and fulfill an ambition of becoming a top-three player in global smartphones, Yang said without specifying a timeframe.
Lenovo posted a first-quarter profit that exceeded estimates, but that came mainly on the back of cost cuts and asset sales, which helped to make up for sluggish demand for smartphones and PCs. Net income rose 64 percent to US$173 million in the period ended June, while sales fell 6.2 percent to US$10.06 billion.
Shares of Lenovo rose as much as 5.2 percent in Hong Kong, on track for their highest level in more than three months. The stock is down about 30 percent this year.
The company had embarked on a plan to cut US$1.35 billion from annual costs and eliminate 3,200 jobs, an effort that is now showing up in quarterly results. The challenge now will be to expand internationally, while investing in key technology such as cloud computing, “artificial intelligence,” robotics and Internet services, the company said.
While Lenovo introduced new Motorola handsets, it sold 31 percent fewer units in the latest quarter. Total PC shipments declined 2 percent. Many of the efficiencies came out of Lenovo’s American division, the company said.
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