Lenovo Misses Expectations on Weak Mobile Sales, Prepares Staff Cuts

Lenovo missed quarterly revenue expectations on Thursday and said it plans to lay off about 10 percent of its global non-manufacturing workforce, after posting a steep sales decline in its mobile division.

The world’s No. 1 PC maker said it plans to cut about 3,200 non-manufacturing positions to save $650 million in the second half of 2015 and about $1.35 billion on an annual basis, reflecting intense competition among global smartphone makers.

Chief executive Yuanqing Yang said Lenovo would also restructure its lagging smartphone business at a one-time cost of $600 million, and was facing its “toughest market environment in recent years.”

Lenovo, which last year spent $2.91 billion to buy handset brand Motorola from Google in a bid to solidify its position in smartphones, pointed to “intensifying competition and long product development lifecycles” in the business.

Its mobile division recorded a pre-tax loss of $292 million in the three months to end June, while Motorola’s shipments stood at 5.9 million units, a 31 percent decline from a year prior.

Overall, Lenovo’s quarterly revenue rose 3 percent to $10.7 billion but missed analyst expectations for $11.29 billion, according to analysts polled by Thomson Reuters SmartEstimates.

The Beijing-based company’s net profit plummeted 51 percent year-on-year to $105 million, but was still ahead of a 59 percent drop expected by analysts.

(Reporting by Gerry Shih; Editing by Richard Pullin)

This article originally appeared on Recode.net.

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