Yang Yuanqing, chairman and CEO of Lenovo Group Ltd, speaks on 'Man meets machine: Smart Internet opens a world of possibilities" during a forum. (Photo : Getty Images)
Two years after acquiring Motorola Mobility, Lenovo Group's Chief Executive Yang Yuanqing has admitted that milking profits from a lossmaking brand is harder than it sounds.
In an interview with The Wall Street Journal, Yang said that the two companies' differences in culture and business model affected the transition, and eventually, Lenovo's strategy to turnaround Motorola's fortunes.
"We underestimated the differences of the culture and the business model," Yang told the WSJ in an exclusive interview.
In 2014, the Chinese tech giant acquired Motorola in hopes of restoring the brand and transforming it into a global leader.
Yang vowed to make the acquisition profitable within six quarters and guaranteed its employees that they would not lose their jobs. Lenovo was then one of the top five smartphones makers globally.
But since acquiring Motorola, Lenovo has cut about 2,000 jobs in the U.S. The company also recorded its first yearly loss since 2009 due to restructuring costs.
The WSJ noted that Lenovo's current struggles reflect the "the potential pitfalls for Chinese companies as they venture abroad."
As lawmakers and government officials from the U.S. and Australia begun scrutinizing Chinese investors, the local government were worried about capital flight and the pace of Chinese companies' acquisitions.
For Lenovo employees, meanwhile, the problem is not only limited to "poor integration."
"Most crucial was that Lenovo lacked a clear vision for how to succeed in some of its largest markets. Mr. Yang pushed sales of Motorola devices in China, where Lenovo's own phones already were dominant and the market was fast becoming saturated with new players. The Motorola devices flopped," the WSJ wrote, based on interviews with Lenovo employees.
This is not the first time that Lenovo admitted to having problems with turning around Motorola's profits. Last year, the company said via a press release that its "integration efforts did not meet expectations." This referred particularly to the 85 percent decline in smartphones sales in China in 2016.
"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," Lenovo said.
