Lenovo has just unveiled its financial results for the second quarter of 2016 and it makes for some mixed reading. While year-on-year revenue has dropped by 8 percent, quarter-on-quarter profits are up 12 percent, the company says that its mobile division is on track to turn back around come the middle of 2017.
As a quick overview of the financial situation, Lenovo pulled in $11.2 billion in revenue in Q2, down 8 percent on last year. However, net income reached a healthy $157 million, a vast improvement on the $714 million loss that the company posted in Q2 2015. It’s not a pristine picture, but Lenovo’s cost saving and restructuring strategies are beginning to help its bottom line.
Mobile shipments YoY have remained mostly flat, registering 359 million in Q2 2015 and a 0.4 percent increase to 361 million in Q2 2016. While sales may not be growing, Lenovo says that it has managed to save $1 billion in mobile expenses over the past 18 months, which is helping to return the division to sustained profitability. Lenovo’s mobile division has been struggling to produce a profit since its expensive aquisition of Motorola from Google, although this purchase may be beginning to pay off. This year’s Moto Z flagship seems to have been one of the company’s more successful launches, and is helping to keep the division on track.
Lenovo expects that the Moto Z will sell 3 million units in its first 12 months, which has led the company to ramp up production to 60,000 units per month. The company suggests that the Moto Z saw similar sales momentum to the launch of the iPhone (although it doesn’t say which model) in their first three months, with the former achieving 1.06 million shipments, while the iPhone edged ahead with 1.12 million. That sounds like a pretty notable achievement for a flagship launch, and it will be interesting to see if the company keeps with its modular design for future devices now. Especially as LG has decided to ditch its modular approach after the poor performance of the G5.
“Market conditions remained challenging but we delivered solid results. Our PCSD business maintained leadership and strong profitability, our Mobile business had good quarter-to-quarter volume growth and margin improvement” – Yang Yuanqing, Chairman and CEO, Lenovo
As for its other divisions, Lenovo’s PC shipments saw a 4.8 percent year-on-year fall to 67 million devices, and the tablet market is showing an even steeper decline of 14.7 percent over the same period. That being said, PC profits actually increased by 3 percent YoY. Tablet shipments came in at just 43 million units for the quarter, suggesting the smartphones are becoming an increasingly important sector for Lenovo’s consumer electronics arm. Despite the PC and tablet markets’ continued slowdown, Lenovo is now the biggest brand in the combined market, capturing a 15.6 percent PC + tablet market share, followed by Apple on 12.9 percent in Q2.
Along with the financial statement, Lenovo has announced three new appointments to lead some of the company’s divisions. Kirk Skaugen joins as Executive Vice President (EVP) and President of Data Center Group, Laura Quatela is the new Chief Legal Officer and SVP, and Dr. Yong Rui comes in as Chief Technology Officer and SVP.