Cary News

Lenovo CEO sees quick turnaround of Motorola business

The CEO of No. 1 PC maker Lenovo assured analysts that the company can quickly turn around Motorola Mobility’s money-losing mobile phones operation once it takes over the business from Google.

Yang Yuanqing also said during a conference call Thursday that the the lineup of low-end servers Lenovo is buying from IBM will become a more-profitable business than its mainstay PCs.

Combined, the two acquisitions announced last month – which together will cost Lenovo more than $5 billion – “will give us a solid foundation to build the new pillars for long-term sustainable growth,” Yang said.

Yang said that synergies and economies of scale will enable a fast turnaround of the Motorola business.

Yang’s remarks came during a discussion of Lenovo’s fiscal third-quarter earnings. Although the company’s revenue and net income outpaced the average projections of analysts polled by Bloomberg News, questions about the pending purchases – especially the Motorola deal – dominated the Q&A section of the conference call.

Motorola’s operating losses totaled more than $1 billion last year, according to data compiled by Bloomberg. Buying Motorola would make Lenovo the No. 3 smartphone maker worldwide and give it a name brand in the United States and Europe, where it currently doesn’t sell smartphones.

Buying IBM’s low-end x86 servers, which boast sufficient computing power to handle the day-to-day operations of a midsize business, would transform Lenovo from an also-ran in the server market to No. 3 worldwide. Its worldwide market share would jump from 2 percent to 14 percent.

Lenovo is based in China and has a headquarters in Morrisville that employs about 2,200 workers. The company’s presence in North Carolina would nearly double with the IBM acquisition.

In its fiscal third quarter, Lenovo’s revenue rose 15 percent to $10.8 billion despite the stagnant PC market, the first time its revenue exceeded the $10 billion milestone. Profit rose 30 percent to $265 million.

“Our strong performance is the direct result of our clear strategy and consistent execution,” Yang said. “We are focused on protecting our core PC business while aggressively attacking growth in ‘PC Plus’ areas including tablets, smartphones, servers and storage.”

Lenovo’s PC Plus products accounted for 16 percent of revenue in the latest quarter, compared with 11 percent a year ago and 7 percent two years ago. The Motorola and IBM deals are an outgrowth of the company’s PC Plus strategy.

Lenovo’s Americas business, led by a 378 percent jump in PC shipments in Brazil thanks in part to an acquisition, rose 36 percent to $2.3 billion.

The company’s stock-like American depositary receipts closed Thursday at $22.61, up 11 cents.