Lenovo expects to slow smartphone bleeding next year

Bloomberg

Lenovo Group Ltd. expects its loss-making smartphone business to turn a corner next fiscal year as it shifts toward higher-end devices and ramps up marketing in the US and China.
The world’s largest PC maker is counting on a revival of the Motorola smartphone business it bought for $2.8 billion to make up for a declining computer industry. The Chinese company emphasized that premium gadgets — such as an upcoming smartphone with augmented reality capabilities — should help stabilize the division in the second half and revive its faltering consumer business.
“I hope we can completely turn around the business in the next fiscal year,” Chief Executive Officer Yang Yuanqing told analysts on a call. But he stopped short of saying the unit will finally make a profit — a target that’s consistently eluded Lenovo since its 2014 acquisition of the U.S. name.
“Integrating the mobile business needs time, it took several years for us to integrate the PC business” after acquiring it from IBM, he told Bloomberg News before the call. “But writing down Motorola is never an option.”
In the interim, Lenovo has slowly relinquished smartphone market share in its home market to aggressive rivals from Huawei Technologies Inc. to Oppo and Vivo. But it’s now willing to spend “heavily” on advertising and marketing to try and fulfill an ambition of becoming a top-three player in global smartphones, Yang said without specifying a timeframe.
Lenovo posted a first-quarter profit that exceeded estimates. But that came mainly on the back of cost cuts and asset sales, which helped to make up for sluggish demand for smartphones and personal computers. Net income rose 64 percent to $173 million in the period ended June, outpacing the $111 million average of analysts’ estimates. Sales fell 6.2 percent to $10.06 billion.
Shares of Lenovo rose 5.2 percent in Hong Kong to close at their highest in more than three months. The stock remains down about 30 percent this year.