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Lenovo closes 2014 with dipped profit, Motorola acquisition partially to blame

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Lenovo closes 2014 with dipped profit, Motorola acquisition partially to blame


Today, Lenovo recapped its yr-finishing quarter’s efficiency with each sure and bad takeaways.

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The quarter’s web benefit dipped to $253 million when compared to the former yr’s $265 million. That is a drop of 4.5%. The acquire of Motorola contributed to the decline. Lenovo obtained Motorola for just about $2.91 billion and the corporate additionally made a deal with IBM for $2.1 billion. Basically, Lenovo spent large on prime companies and it weighed closely in this document.

Revenue, then again, did exceed $14 billion and that may be an building up of 31% when compared to the former yr. And Motorola used to be a part of that, too, along Lenovo-branded units. Motorola bought greater than 10 million units during the quarter. The 2014 vary of Motorla units actually captures the eye of customers all over the world. The building up used to be above 118%. With its re-access into China, Lenovo says Motorola will have to be winning inside the subsequent 4-6 quarters.

Lenovo stated that it expects expansion around the board in coming quarters.

Lenovo Q3 2014/15 Results Exceed Consensus Estimates with Strong Core Business and Fast Traction in New Investments

Powered via new phone and undertaking engines, profitability set to amplify

  • US$14.1 billion in income
  • Pre-tax source of revenue prior to non-money, A&I-similar accounting fees* of US$348 million and pre-tax source of revenue of US$274 million
  • Net source of revenue prior to non-money, H&I-similar accounting fees* of US$327 million and web source of revenue of US$253 million
  • Achieved document top milestone of 20 % PC marketplace percentage**
  • A&I grants extra stability: 65 % of income now from PCs, 24 % from Mobile and 9 % from Enterprise vs. 365 days in the past while PCs have been 81 %
  • Basic EPS of 2.32 US cents, or 17.99 HK cents
  • Net money reserves of US$1.3 billion (as of December 31, 2014)

HONG KONG–(BUSINESS WIRE)–Lenovo Group (HKSE: 0992)(PINK SHEETS: LNVGY) nowadays introduced consensus-beating effects for its 3rd financial quarter ended December 31, 2014, appearing a robust PC industry and rapid traction within the integration of its Motorola Mobility (Motorola) and previous IBM System x, x86 server (System x) investments. Quarterly income used to be US$14.1 billion, a 31 % building up yr-over-yr.

Third quarter pre-tax source of revenue prior to non-money H&I-similar accounting fees used to be US$348 million, up 8 % yr-over-yr. These non-operational, non-money, H&S-similar bills totaled US$74 million and incorporated fees comparable to intangible asset amortization and pastime on promissory notes similar to the Motorola and System x investments. Including those bills, pre-tax source of revenue used to be US$274 million, down 15 % yr-over-yr. Similarly, 3rd quarter web source of revenue used to be US$253 million, down 5 %, at the same time as web source of revenue sooner than non-money, A&S-similar accounting fees used to be US$327 million, up 23 %.

Lenovo’s center PC industry is still robust whilst it drives a vital transformation and diversification with the addition of the Motorola and System x companies. Balance has turn out to be a tremendous power for Lenovo: PCs now account for 65 % of the corporate’s income, whilst Mobile provides 24 % and Enterprise contributes 9 %. Just a yr in the past, PCs accounted for 81 % of Lenovo’s industry.

“This quarter, we're on the beginning line of a brand new race, however the effects display that we've got the proper technique, we made the suitable acquisitions and we carried out smartly globally, so S am assured we're in a position to win,” stated Yuanqing Yang, chairman and CEO of Lenovo. “Our center PC industry maintained its prime place and extra progressed profitability. The newly received companies are attaining nice momentum of their first quarter of integration. They are certainly changing into our expansion engines. Motorola is already an international energy: for the primary time it bought greater than 10 million devices within the quarter and it's now re-getting into the China marketplace. Meanwhile, we've a robust get started with the System x integration, even at the same time as we additional refine and advance it, leveraging Lenovo’s operational excellence and potency to be much more aggressive. S stay absolutely assured we will be able to meet all of our monetary commitments this yr, and in addition that we're on track to win in the longer term.”

The Company’s gross benefit for the 3rd financial quarter higher 54 % yr-over-yr to US$2.1 billion, with gross margin at 14.9 %. Operating benefit for the quarter lowered 3 % yr-over-yr to US$325 million. Basic profits in keeping with percentage for the 3rd economic quarter used to be 2.32 US cents, or 17.99 HK cents. Net money reserves as of December 31, 2014, totaled US$1.3 billion.

Innovation in Lenovo keeps to force industry style transformation and ship spectacular merchandise that force gross sales and profitability. In October, the corporate done a huge international shopper product release, pronouncing a brand new circle of relatives of Yoga convertible PCs and pills. Lenovo gained a document 77 awards on the Consumer Electronics Show in early January throughout each and every class – PC (the place Lenovo’s lightest ever LaVie pc gained most sensible honors on the display), tablet, phone, programs, tool and peripherals – demonstrating its distinctive breadth and intensity of product innovation.


In the PC Group or PCG, which comprises PCs and Windows drugs, Lenovo gross sales have been US$9.2 billion with a document top pre-tax source of revenue (PTI) of US$494 million. Lenovo shipped 16 million PCs within the quarter, up 4.9 % yr-over-yr, for a complete marketplace percentage of 20 %. Going ahead, consolidation developments want this industry. Lenovo bought its 100 millionth ThinkPad pc PC, marking a ancient milestone for this mythical logo.

In the Mobile Business Group or MBG, which incorporates merchandise from the Motorola funding, Lenovo-branded cell phone industry, Android pills and TVs, Lenovo gross sales have been US$3.4 billion producing PTI of poor US$89 million. Motorola shipped greater than 10 million devices, up 118 % yr-over-yr, including US$1.9 billion to MBG’s sales. Soon to re-input China, Motorola is on target to be winning inside of 4-6 quarters of shut.

Combining shipments of Motorola and Lenovo-branded units made Lenovo a really international participant, the 3rd biggest supplier of smartphones at the back of Samsung and Apple and their so much credible challenger. Together, the 2 manufacturers had just about 6.6 % marketplace percentage, up 78 % yr-on-yr. Global tablet marketplace percentage used to be 4.8 %, with 3.7 million shipments, up 9 % yr-over-yr, powered by way of the release of our recent Yoga tablet.

Unlike many smaller cell phone gamers that depend virtually utterly on a slowing China marketplace, Lenovo now drives approximately 60 % of its cell phone volumes out of doors China, having entered 67 nations within the ultimate years. Lenovo has constructed the size, distribution, logo belongings and IP portfolio required to compete around the globe and problem the highest gamers. And, as phone developments transfer from top class to mainstream, and mature to rising markets, Lenovo is in the most productive place to seize those subsequent waves of expansion and ship its said profitability commitments within the Motorola industry.

In the Enterprise Business Group or EBG, which incorporates servers, garage, tool and products and services bought beneath each the Lenovo ThinkServer logo and the System x industry unit, gross sales have been US$1.2 billion. Sales of the System x unit have been US$986 million. Only 90 days into the mixing of System x, EBG brought sure operational PTI, despite the fact that its same old PTI – which incorporated non-money, C&I-similar pieces – used to be bad US$42 million. It is solidly on the right track to be a US$5 billion industry with higher margins than PC in 1 yr.

Combined shipments of Lenovo ThinkServer and System x servers made Lenovo quantity 3 around the globe, with 10.4 % marketplace percentage. Despite the serious aggressive fireplace within the yr given that Lenovo stated it deliberate to gain System x, its industry is stabilizing, with speedy good fortune in China making it primary in that marketplace, at the same time as taking advantage of get right of entry to to new possibilities in 160 nations that have been in the past unavailable to IBM or Lenovo.


Lenovo’s China geography totaled US$4.1 billion in income within the 3rd economic quarter, an building up of 1 % yr-over-yr, which accounted for 29 % of the Company’s around the world income, whilst running margin progressed through 0.3 issues yr-over-yr to 5.7 %. During the 3rd quarter, Lenovo safe its PC management with 38.2 % percentage. Fierce festival within the China cell phone industry used to be a drag at the efficiency of Lenovo-logo smartphones.

In the Asia Pacific geography, Lenovo’s income totaled US$1.7 billion for the 3rd quarter, or 12 % of the Company’s around the globe income, up 7 % yr-over-yr, with report top running margin of 5.4 %, up 3.9 issues yr-over-yr and document top PC marketplace percentage at 16.1 %, up 0.2 issues yr-over-yr. Strong volumes in telephone shipments have been noticed around the ASEAN area.

Lenovo’s income within the Europe/Middle East/Africa (EMEA) geography throughout the 3rd economic quarter noticed persisted expansion and greater profitability with income up US$1.6 billion, a 40 % building up, to succeed in US$4 billion, whilst margin progressed by way of 1.2 issues yr-on-yr to 3 %. Powered via robust shopper efficiency, this good fortune drove a report-environment contribution to Lenovo’s around the world income of 29 %. During the quarter, Lenovo had document PC marketplace percentage of 19.6 % in EMEA, up just about 4.4 issues. Lenovo accomplished the quantity 1 place in PC throughout 13 EMEA nations, additional making improvements to its quantity place within the EMEA PC marketplace.

The Americas geography income used to be US$4.3 billion for the 3rd economic quarter, up 88 % yr-over-yr, comprising 30 % of the Company’s around the world income, basically due to the inclusion of Motorola and System x within the geography’s effects. The Americas geography noticed PC marketplace percentage of 11.1 %. Lenovo maintained the quantity 4 place in america at the same time as averting fierce price cutting war in decrease finish, low benefit units to offer protection to profitability. The North America area noticed robust income and cargo expansion and forged benefit enhancements, at the same time as the Company is taking decisive motion to opposite demanding situations in Brazil, which impacted the geography’s general efficiency.

* These figures are supplied for higher transparency and to assist additional research of the industry.
** see IDC knowledge 4Q 2014
*** Previously, the corporate supplied monetary breakdowns via product. With the acquisitions of Motorola and System x, control believes reporting through industry teams absolute best displays the Company’s efficiency.


Lenovo (HKSE: 992)(ADR: LNVGY) is a $39 billion international Fortune 500 corporate and a pace-setter in offering cutting edge shopper, business, and undertaking generation. Our portfolio of high quality, safe services covers PCs (together with the mythical Think and multimode YOGA manufacturers), workstations, servers, garage, sensible TVs and a circle of relatives of cellular merchandise like smartphones (together with the Motorola logo), pills and apps. Join us on LinkedIn, apply us on Facebook or Twitter (@Lenovo) or discuss with us at


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