The Chinese company will spend approximately $600 million as restructuring costs approximately $300 million to clear smartphone inventory.
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For the period, Lenovo shipped 16.2 million smartphones, up 2.3% from the number shipped during last year’s second quarter.
Lenovo will shift its smartphone focus away from China, where some new vendors are playing irrationally, he said. There were also macroeconomic challenges in the South American market, especially in Brazil.
Lenovo’s Enterprise Business Group, which includes the x86 server business that Lenovo bought from IBM in 2014 for $2.3 billion, will be repositioned and become more cost-competitive, Yang wrote.
Lenovo said the job cuts and restructuring will be completed as soon as possible. “To create a faster, leaner business model, we will leverage our global sales force across Lenovo and we will accelerate the work already well underway to maximize efficiency in our global supply chain”.
As for mobile products including smartphones, Lenovo will try to better align its Motorola brand, recently acquired from Google, with Lenovo, with Moto taking the lead in product development, design and manufacturing. Lenovo gained almost one point of share and strengthened its #3 position in the tablet market.
This was the toughest quarter since 2008 for the PC market, Yang said in a phone interview Thursday.
The elimination will enable Lenovo to cut expenses by about $650 million in the H22015 and about $1.35 billion on an annual basis.
“With the restructuring actions announced today, management reiterates its commitment to see profitability in Motorola within four to six quarters of close (two to three quarters from now)”, the company said.
Motorola wants to offer a pure Android experience with its phones in China.
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Amid consolidation in the personal computer industry, Lenovo said the aim was to seize a 30 per cent market share in the global market. Revenue increased by 3% to $10.7 billion.
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Revenue from Lenovo Enterprise Business – including servers, storage, software and services rose 5.5 times to $1.1 billion due to inclusion of System x this year. Net debt reserves as of June 30, 2015, totaled US$0.5 billion. Yuan depreciation has “no significant implication to our cost of borrowing”, said Chief Financial Officer Wong Waiming.
