Lenovo’s fiscal first quarter results failed to meet expectations, leadi ng the company to announce hefty job cuts and a restructuring of its smartphone business, which will produce fewer models going forward.
For the three months to the end of June, the Chinese firm posted revenues of US$10.7 billion, up 3% year-on-year, but pre-tax income declined by 80% to $52 million and net income slid 51% to $105 million.
"Last quarter, we faced perhaps the toughest market environment in recent years," said Lenovo CEO Yuanqing Yang.
Lenovo’s numbers were hit by declines in the global PC and tablet markets, and slowing growth and increasing competition in the smartphone space, particularly in its home market.
"There were macroeconomic challenges in Brazil and Latin America and large currency fluctuations, intensifying competition, which hurt Motorola’s profitability in particular," the firm said, in a statement.
"In the face of financial results that did not meet expectations, Lenovo is undertaking broad, decisive actions – including better aligning its businesses and significantly reducing costs – to return to profitable, sustainable growth and achieve its long-term goals," it added.
The firm aims to reduce costs by around $650 million in the second half of this year and by about $1.35 billion on an annual basis.
To help it reach this goal it will cut 3,200 non-manufacturing jobs, or around 5% of its total global headcount.
The firm said it will incur restructuring costs of around $600 million and spending to clear smartphone inventory will come in at $300 million.
It will restructure its mobile business group to "better leverage the complementary strengths of Lenovo and Motorola." It aims to build upon Lenovo’s global sales force and rely on the Motorola side of the business to design, develop and manufacture smartphone products. It will streamline its product portfolio, producing fewer, but more clearly differentiated, smartphone models.
