Lenovo plots turnaround of smartphone business after posting first annual loss in six years

Weighed down by a weak economy and the largest restructuring in its corporate history, Chinese technology giant Lenovo Group Thursday unveiled plans for a more aggressive investment strategy to turn around its flagging smartphone operation after reporting its first annual net loss in six years.

“We hope to improve profit margins and grow our personal computer, data centre and smartphone businesses. I hope the market will be better than last year,” Lenovo chairman and chief executive Yang Yuanqing said at a media briefing in Hong Kong.

Lenovo, the world’s biggest supplier of personal computers, reported a US$128 million net loss in its fiscal year ended March 31, compared with a US$829 million net profit in the previous fiscal year.

The company, which operates in more than 160 countries, mainly attributed that loss to restructuring costs of US$596 million and one-time charges totalling US$327 million, which included a write-off of its smartphone inventories as part of a reorganisation at its mobile unit announced in August.

It estimated that operating expenses rose 20 per cent from a year ago. That included US$2.26 billion in operating expenses after completing its acquisition of IBM’s x86 server business and Motorola Mobility in October 2014.

Total revenue slipped 3 per cent to US$44.91 billion, down from US$46.29 billion, due to a tepid global personal computer market squeezed by economic issues like falling commodity prices and weak international currencies.

“While Lenovo is seeing structural challenges in all key businesses, the smartphone business remains the weakest spot,” Jefferies equity analyst Ken Hui said in a research note.