Lenovo's Motorola Purchase Finally Brings Profitability To Mobile Business

Lenovo is displaying the kind of business savvy that must have competitors going nuts with envy. To wit, Lenovo became the world's top supplier of PCs a long time ago and has managed to maintain its No. 1 ranking by outpacing market trends, and now it's showing it can be successful in the mobile market as well. More on that in a moment.

For its third fiscal quarter ended December 31, 2015, Lenovo reported $12.9 billion in revenue. That's actually down 8 percent year-over-year (or 2 percent year-over-year in constant currency), but good for a $300 million profit, up 19 percent compared to the same quarter a year prior and better than analysts were expecting. And it's despite challenging market conditions.


"Last quarter, although we were impacted by the global macro-economic slowdown, currency fluctuations in key markets, and PC market decline, Lenovo still achieved record high profit and delivered on our commitment to turn around the Mobile business," says Yuanqing Yang, chairman and CEO of Lenovo. "Next, in PCs, we will leverage the consolidation trend, commercial PC replacement, and opportunities in innovative product categories to drive growth. In Mobile, we will build scale and efficiency to accelerate our growth in emerging markets, breakthrough in mature markets with innovative products and premium brands, and expand in the open market in China with a stronger product portfolio. And finally, in Enterprise, we will leverage leading technologies and strategic partnerships to drive profitable growth."

In regards to mobile, Lenovo's $2.91 billion acquisition of Motorola Mobility two years ago is starting to pay off. Lenovo at the time said it would break even 4-6 quarters after buying the brand and has now met that commitment, which the company credits to successful restructuring and strong performance in emerging markets outside of China. Those efforts translated into $3.2 billion in quarterly sales, two months of which included Motorola's results. All tallied, Motorola contributed $2 billion to Lenovo's mobile business.

As for PC sales, quarterly sales dropped 12 percent to $8 billion. Lenovo attributed the decline to a "greater than expected slowdown in the PC market and foreign exchange fluctuations," yet it held onto the top spot for an 11th straight quarter, this time with a record high 21.6 percent share of the market.

Lenovo isn't perfect—let the records show that Superfish was a super sized mistake—but despite the occasional misstep, the Chinese outfit is killing it on all fronts.