Rapidly declining net income results between April and June will lead to massive layoffs, as well as a reorganization of both Lenovo’s mobile and enterprise businesses.
A number of positives can be ascertained from the latest financial report of the world’s largest PC designer, including a year-over-year increase in overall revenue and record-breaking share of the global computer market.
But a staggering drop of 51 percent in earnings after deductions compared to Q1 2014 can’t be ignored. And alas, 3,200 employees of the total 60,000 workforce need to go away. That’s a 5 percent cut across the board, or 10 percent of the current non-manufacturing headcount.
Just like all other tech giants bleeding money nowadays, Lenovo aims for a simpler, more “streamlined” mobile product roster, with “fewer, more clearly-differentiated models.” Fret not, Moto X, G and E fans, as the Chinese OEM probably intends to simplify its own convoluted portfolio.
They’ll also hand over the design, development and manufacturing reins to Motorola, apparently, essentially retaining only the management of the struggling division. Okay, struggling might be a bit of a stretch, as Lenovo (together with Motorola) accounted for 4.7 percent of worldwide smartphone sales in the quarter, snatching the number five spot in the vendor ranks.
That’s not so bad, although it obviously doesn’t compare with the outfit’s expanding PC domination. After reaching 20 percent+ share on a global scale, Lenovo targets a rise to 30 in the near future, “taking advantage of market consolidation” while continuing to reduce costs.
Despite general consensus among industry analysts that tablets are a thing of the past, they keep bringing Lenovo steady profits, on the back of 2.5 million unit shipments in Q1. The figure is up 3.8 percent year-on-year, and it allowed the company to solidify its number three position worldwide, with a 5.6 percent slice of the pie.
Smartphone sales exceeded 16 million during the reported period, while PCs stood at 13.5 mil, down 7.1 percent, which is ultimately a win, given the “overall market decline” nearly hit 13 percent. Still, if expenses top returns, heads must roll, so the decision to sack 3,200 people feels sensible from a business standpoint.