Lenovo to relaunch Motorola brand in China; posts strong sales, earnings

Quarterly profit surges 30pc on strength of computer and smartphone sales as chairman vows to relaunch Motorola brand on mainland

PUBLISHED : Thursday, 13 February, 2014, 9:51am
UPDATED : Friday, 14 February, 2014, 4:26am

Lenovo, which saw quarterly revenue sail past the US$10 billion mark for the first time in the three months to December, plans to swiftly turn around Motorola Mobility's loss-making smartphone business by relaunching the brand in mainland China.

Chairman and chief executive Yang Yuanqing said yesterday: "I am confident that from day one after closing [the Motorola Mobility acquisition] we will be able to realise the synergies that are tangible and substantial, and introduce new products to the market."

Lenovo, the world's largest supplier of personal computers, agreed last month to buy Motorola Mobility from Google for US$2.91 billion, marking its biggest-ever corporate acquisition.

Yang said Lenovo is "confident of capturing the 4G opportunity in China", where it believed "consumers will embrace Motorola once again". The company "will become a much stronger No 3 in the global smartphone market" with the Motorola Mobility brand and achieve "significant savings" after integrating its operations, he said.

Lenovo agreed last month to pay US$2.3 billion to acquire International Business Machines' low-end server division, a business that Yang expects will boost profitability at the company soon after the transaction is completed.

Both the IBM x86 server business and Motorola Mobility deals are subject to regulatory approvals and are expected to close in about nine months.

Kirk Yang, Barclays' head of technology hardware research for Asia, said in a report Lenovo's "enterprise products, such as corporate PCs, servers and storage, are likely to be the next [growth] driver, along with smartphones and tablets".

Lenovo reported strong earnings in its fiscal third quarter to December on record shipments of personal computers, smartphones and media tablets.

The company posted a 30 per cent increase in net profit to US$265.31 million, up from US$204.87 million a year earlier.

Revenue advanced 15 per cent to US$10.79 billion from US$9.36 billion.

Its results beat the consensus estimate of US$244 million net profit on revenue of US$10.49 billion from a survey of 15 analysts by Thomson Reuters.

Lenovo strengthened its No 1 position in the global personal computer industry, reaching a historical high market share of 18.5 per cent in the three months to December, according to industry estimates. The company grew its personal computer shipments 9 per cent year on year to 15.279 million units, according to research firm IDC.

For the third consecutive quarter, Lenovo's combined shipments of smartphones and tablets - 17.3 million units - surpassed the number of personal computers it shipped.

The combined sales of smartphones and tablets worldwide climbed 73 per cent year on year to US$1.7 billion, which made up 16 per cent of Lenovo's total revenue in the quarter.

Shares of Lenovo yesterday fell 0.58 per cent to HK$8.63 in a market that closed 0.54 per cent lower.