Lenovo is one of the Chinese tech powerhouses who have forayed into the rising Indian mobile market. (Photo : www.english.caixin.com)
Global personal computer maker Lenovo Group Ltd. reported a net loss of $714 million on Thursday, Nov. 12, for the fiscal second quarter that ended in September, which it said was due to higher restructuring costs, the China Daily reported.
Although it was the company's first loss in six years, the report said that it was still narrower than the $803 million estimated by analysts.
Lenovo's revenue for the reporting period was 12.2 billion yuan ($1.92 billion), up 16 percent year-on-year, which it said could be attributed to strong sales growth and cost-cutting in its smartphone business.
The company said its net losses are primarily due to the $923 million one-time costs, which comprised of $599 million restructuring costs and $324 million losses from cleaning up unsold smartphone inventories.
According to the company, it would have made $166 million in profit had the one-time costs not been made.
"Though we spent about $900 million on job cuts and restructuring, it will save us costs of at least $650 million in the second half of the year. This will give shareholders and investors better returns. Transformation and integration can not be accomplished in one stroke and it is important to be patient," Yang Yuanqing, chairman and CEO of Lenovo, said.
Lenovo also bared plans to retrench about 3,200 employees, which accounts for 5 percent of its global workforce. It also announced a business restructuring plan.
Despite the loss, Lenovo has maintained its top ranking in the global PC market. Its PC revenues reached $15.4 billion during the period, despite a 9-percent slide from the previous year. In addition, the company's mobile business earned revenues of $4.8 billion, up 65 percent year-on-year.
The report said that the company's shares rose 5.77 percent in Hong Kong to close at HK$7.7 ($0.99) per share.
In 2014, Lenovo bought IBM Corp.'s x86 server unit and Google Inc.'s Motorola Mobility unit. It spent more than $5 billion on the two acquisitions.
Yan Zhanmeng, a senior analyst with International Data Corp. China, told China Daily: "Lenovo is in the midst of a major restructuring exercise. It is reducing the output of low-end mobile phones and shifting focus to high-end models. The company is also optimizing its staff structure, or in other words going in for a strategic overhaul."
In June, Chen Xudong, a senior vice president, was entrusted to oversee Lenovo's business in China and find new business models which can compete with mobile phone startups.
Yan, however, said that the loss is understandable. "The deficit may continue for some time as China's PC and smartphone market has reached saturation."
He remained bullish about the company's future growth potential, and expects that the company's performance will recover in the coming years.
