Wednesday, April 12, 2017

Update: Lenovo’s mobile business is still bleeding money

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Update, April 13: Lenovo just released its results for the quarter ending December 31, 2016, and the figures are not exactly encouraging. The group sold 15 million units in the quarter, including Lenovo- and Moto-branded devices, for total quarterly sales of $2.2 billion. That’s a 23 percent drop compared to the same quarter of the previous year. The good news is sales actually improved seven percent quarter-on-quarter, thanks to strong growth in mature markets and a 20 percent year-on-year increase of Moto-branded products.

Despite the quarterly growth, Lenovo’s mobile biz remains firmly in red territory with a loss margin of 7.1 percent, a 0.6 improvement over the previous quarter.

At a group level – including the PC and data center divisions – Lenovo recorded revenue of $12.2 billion and a net income of $98 million. In contrast with the rest of the industry, Lenovo actually managed to increase its tablet sales by ten percent. Chromebooks were also up by 76 percent.

Original post, April 11: Market intelligence company TrendForce released its Q1 2017 report on the smartphone industry earlier today, and it indicates that Lenovo is struggling. According to the report, Lenovo’s smartphone production volume dropped by almost 30% between Q4 2016 and Q1 2017, and its first-quarter result reflects a year-on-year drop of almost 20%.

“Lenovo’s smartphone market share is thus on a decline,” wrote TrendForce in the report. “[We project] that Lenovo will post single-digit growth in production in the second quarter.”

So far this year, Lenovo hasn’t released much on the smartphone front, it launched the Moto G5 only last week and the Moto Z2 is still a rumor. But because it didn’t have much in the way of major releases in the same period last year, this 30% drop is worrying.

Lenovo makes products in its own name as well as ZUK and Motorola, since purchasing the latter from Google for $2.91 billion back in 2014. The company announced last May, however, that its attempts to integrate the Motorola brand hadn’t gone according to plan after posting its first yearly loss in six years. Following this, the company said it planned to refocus and “get the US business back on track with a competitive product portfolio.”

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The Moto Z range arrived soon after and seemed to be fairing well with 1 million units sold as of last November. That’s far less than the likes of Apple and Samsung’s flagship phones, but it still makes it one of the most popular Moto devices in recent years. Despite the device’s relative success, however, Lenovo’s Motorola product sales were still down US$2.2 billion (23%) from the last quarter of 2015 to the last quarter of 2016. The mobile division as a whole seems to be faltering as a whole even with individual successes.

The Chinese market is a key factor here, as many smartphone manufacturers are struggling due to huge competition in that territory — it was just revealed recently that LG wouldn’t launch its latest flagship there, the LG G6, because of this.

Lenovo’s current plan seems to be to drop phase out its Lenovo and ZUK branding in China and reintroduce the Motorola branding there, while trying to get more US carriers to sell its Moto Z phones (Verizon is currently the carrier to stock it).

Will this help turn things around at the company? Give us your thoughts in the comments.

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