Lenovo vows to stem losses at Motorola Mobility
Lenovo has pledged to turn around loss-making Motorola Mobility in four to six quarters, as the Chinese hardware maker looks to increased production and emerging markets to boost profitability.
CEO Yang Yuanqing also promised to do so without slashing any jobs. "Don't be scared by the US$1 billion-a-year loss. We will improve that even from day one. Google is very good at software, ecosystems and services, but we are stronger in the manufacturing of devices," Yang said at the Mobile World Congress in Barcelona Tuesday, reported Bloomberg.
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The CEO gave the six-quarter timeline based on expectation Lenovo will be given regulatory approval and complete its US$2.91 billion acquisition of Google's Motorola Mobility handset business in January. The Chinese tech giant also purchased IBM's x86 server business for US$2.3 billion that same month.
Yang is hoping the two buys will establish Lenovo as a more than a PC maker, amid a shrinking PC market, and looking to improve profitability from increased production and sales from emerging markets. He will also be focusing on slashing costs from internal communication and computing services, and noted that Motorola's gross margins were already "pretty decent", according to Bloomberg.
During its third-quarter earnings, Lenovo reported a 30 percent climb in profits on US$10.8 billion revenue, but had warned its Motorola Mobility buyout could harm earnings in the short term. Yang said then the integration of Motorola and Lenovo's handset business would provide economies of scale and significantly slash material procurement cost as well as other expenses. However, this would take time to produce notable results, he said.
Yang said in Barcelona: "A company should focus on not just the short-term performance, but also long-term sustainable growth. If we only focus on PCs, one to two years later we cannot further grow. So we must find a new area, so we can help our shareholders make more money, and see more growth. So I think our choice is the right choice."