Lenovo stumbles in turnaround of smartphone business as it reports a quarterly net loss

More than four years after making its biggest deal with the US$2.9 billion acquisition of Motorola Mobility, computer maker Lenovo Group is still struggling to revive its flagging smartphone business amid intense competition with other Chinese brands.

Lenovo may have reached a crossroads and could look to re-evaluate that business, which sells both Moto and Lenovo-brand smartphones, as profitability remains elusive.

Lenovo’s mobile business was a sore spot in the company’s results for the fiscal third quarter ended December 31, which it reported on Thursday. The world’s second-largest personal computer supplier recorded a US$289 million net loss after booking a one-time write-off of US$400 million of deferred income tax assets during the quarter.

That compares with a US$98 million profit in the same period a year ago and a projected US$124.5 million profit based on the average of analysts’ estimates compiled by Bloomberg.

The non-cash write-down stemmed from recent US tax reform legislation, which cut the US corporate tax rate to 21 per cent from 35 per cent.

Total revenue grew 6 per cent to US$12.9 billion, up from US$12.2 billion a year earlier and above a market forecast of US$12.5 billion.