Lenovo Posts First Loss In Six Years

Lenovo CEO Yang Yuanqing said integration efforts related to the company's past acquisitions "did not meet expectations."
Katie Kuehner-HebertMay 26, 2016

Huge acquisition and restructuring costs as well as weak sales for its smartphones business led China’s Lenovo to post its first loss in six years.

The Hong Kong-based manufacturer of personal computers and other consumer electronics on Thursday reported a net loss of $128 million for the year ending March 31, which compared with a profit of $829 million the previous year. Analysts had expected a loss of $123.6 million, according to Thomson Reuters SmartEstimates.

Lenovo’s profits were hurt by costs incurred following its acquisitions in 2014 of the Motorola phone business from Google and IBM’s low-end server unit. It also booked a charge of $923 million for costs related to restructuring the businesses and clearing out smartphone inventories.

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Revenue fell 3% to $44.9 billion, although at constant currency exchange rates revenue rose 3%. For the fourth quarter, the revenue drop was greater, 19%. The company attributed the decrease to sluggish PC sales.

“These results show integration efforts did not meet expectations,” Lenovo’s chief executive Yang Yuanqing said in a press release. “In particular, China shipments declined 85% as the business shifted focus to open market and higher price bands, and product transition in North America was not successful. Lenovo has learned a great deal since the close of the Motorola acquisition and is applying learnings quickly, with actions in organization, leadership, and approach.”

According to Reuters, Yang later told reporters at a news conference that the company has never regretted acquiring Motorola.

“Otherwise, we would not have had the global footprint we see today,” Yang said. Still, he added that better integration was needed going forward to improve products and operating efficiencies.

“With its shares at a near five-year low, the Hong Kong-listed company is also looking at the possibility of a listing back in China, adding to the growing number of Chinese companies heading back home as restrictions on capital flows to and from China create strong demand for locally-listed stocks,” Reuters wrote.

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