Lenovo Group Ltd, the world's biggest personal computer maker, reported a net loss of $714million on Thursday for the fiscal second quarter that ended in September, due to higherrestructuring costs.
Though the loss was the first for the company in the past six years, it was still narrower than the$803 million estimated by analysts.
Lenovo said revenue for the reporting period was 12.2 billion yuan ($1.92 billion), up 16 percentyear-on-year. It attributed the revenue surge to strong sales growth and cost
cutting in itssmartphone business.
Lenovo said its net losses are primarily due to the $923 million one-time costs, comprising $599million restructuring costs and $324 million losses from cleaning up unsold smartphoneinventories.
Without the one-time costs, the company would have made a profit of $166 million, it said.
Yang Yuanqing, chairman and CEO of Lenovo, said: "Though we spent about $900 million on jobcuts and restructuring, it will save us costs of at least $650 million in the second half of the year.This will give shareholders and investors better returns. Transformation and integration cannot beaccomplished in one stroke and it is important to be patient," he said.
Lenovo maintained its top ranking in the global PC market and its PC revenues reached $15.4billion during the period, despite a 9 percent slide from previous year. Moreover, the company'smobile business achieved revenues of $4.8 billion, up 65 percent year-on-year.
Lenovo shares climbed 5.77 percent in Hong Kong to close at HK$7.7 ($0.99) per share.
In 2014, Lenovo bought IBM Corp's x86 server unit and Google Inc's Motorola Mobility unit. Itincurred expenses of more than $5 billion on the two acquisitions.
Lenovo said that it will cut about 3,200 employees, which accounts for 5 percent of its globalworkforce, while releasing its first quarter earnings report in August, and also announced abusiness restructuring plan. The Motorola unit will henceforth be responsible for design,development and manufacture of smartphones.
Though the industry has already factored in the company's restructuring plan, there are stillconcerns about the performance of the company's mobile business.
Yan Zhanmeng, a senior analyst with International Data Corp China, told China Daily: "Lenovo isin the midst of a major restructuring exercise. It is reducing the output of low-end mobile phonesand shifting focus to high-end models. The company is also optimizing its staff structure, or inother words going in for a strategic overhaul."
In June, Lenovo entrusted Chen Xudong, a senior vice-president overseeing its China business,to find new business models that can compete with mobile phone startups.
Yan said it is understandable that Lenovo has reported a net loss. "The deficit may continue forsome time as China's PC and smartphone market has reached saturation."
He, however, remained bullish on Lenovo's future growth potential, and estimates that thecompany's performance will rebound in the year after next.
Zhu Dalin, an analyst at Beijing-based Internet consultancy Analysys International, said: "It isdifficult for Lenovo to make important breakthrough in the smartphone sector, and it faces strongheadwinds for boosting revenue in the highly competitive smartphone market."
According to consulting company Strategy Analytics, Lenovo accounted for 5.3 percent on globalsmartphone market in the second quarter, higher than 4.8 percent in the first quarter, but stilllower than 7.6 percent from the same period last year.
The article transsshipment from China Daily
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