Lenovo to Shed 5% of its Workforce, Transfer All Smartphone Efforts to Motorola



Despite a declining tablet and PC market and the saturation in the Chinese market being witnessed, Lenovo was still able to cut back a lot of the ground it had ceded to the big two tablet vendors in the vendors to make itself comfortable in third place and for the ninth consecutive quarter, maintain its status as the number one PC vendor by shipments in the world. The company is however still trying to find its footing in the smartphone market despite increasing its shipment year on year by 2.3%.

Lenovo managed to ship 13.5 million PCs in Q2 2015 according to data it revealed when announcing its financial results for that period. As a result, its PC business clocked in sales of $7.3 billion in the quarter with pretax income of $368 million which was a drop of 8% year over year. The number of PCs shipped was also another drop year over year (7.1%). Still, that was still higher and better than the overall PC market dip of 12.8%. So at a time when just about every PC vendor was counting their losses, Lenovo still managed to increase its share of the market to a 20.6%. The company hopes to raise its share of the PC market to 30% in the next 3 years.

Lenovo continued piling pressure on market leaders Samsung and Apple in the tablet category as the 2.5 million units it shipped in Q2 2015 boosted its shipment numbers by 3.8% year over year as it sat pretty in third place with 5.6% share of the tablet market.

It was in mobile however where the company’s fortunes weren’t as great. Despite a growing presence and acceptance in emerging markets, that was still not enough to shield Lenovo’s Mobile Business Group from posting a total pretax loss of $292 million and have its share of the global smartphone market decline from 5.2% to 4.7%. As a result, Lenovo is the 5th largest smartphone vendor in the world.

Motorola, the smartphone brand that Lenovo bought from Google, accounted for 5.9 million of the 16.2 million smartphone units that Lenovo shipped in Q2 and its lack of profitability is what led to the Mobile Business Group’s overall losses. Motorola faced some challenges in key Latin America markets. With the Motorola brand and Lenovo’s own existing mobile device divisions releasing devices in various markets around the world, the company’s focus in mobile has somehow been split and as part of plans to bring the Mobile Business Group back to profitability, Lenovo is restructuring it. That will involve consolidation of current operations and some downsizing as well.

Lenovo will let go about 3,200 of its 60,000 strong workforce as part of those plans. Motorola will be tasked with all the designing, development and manufacturing of the group’s smartphones. Motorola devices have struck the right chords with users and critics alike not only at the high end and mid-range segments that the brand had dominated while still under Google but also in the low end segment and tapping into that is expected to help Lenovo ward off the intensifying competition it has been facing from rivals like Huawei and Xiaomi.