Chinese company Lenovo, which is in the process of buying the Motorola brand from Google, has reported a 23 percent year-on-year increase in first-quarter profits to $214M, reports Reuters. The company also said that worldwide phone sales were up 39 percent, in line with recent IDC numbers.
While Lenovo recently became the market leader within China, CEO Yang Yuanqing said that the company will in future be focusing on more profitable overseas markets …
“China is still one of the most important markets for Lenovo, but actually we have more potential opportunity outside of China,” Yang said. He cited recent sales growth rates of 300 percent and 500 percent in Southeast Asia and Eastern Europe, respectively.
Yang repeated the sentiment in an interview with the WSJ, saying that the Chinese market was not a profitable one.
I would say China is the most competitive market in the world. There are so many local players, and some of them […] don’t want to make money in the short term. We definitely don’t want to lose our leadership position in China, and we must balance growth in market share with profitability. Our smartphone business in China make a little bit of money, but not so much.
Lenovo’s acquisition of the Motorola brand is subject to regulatory approval, something which the company says it expects by the end of the year, while analysts predict that it may happen sooner.
Despite the popularity of its handsets, Motorola was losing money prior to Google’s purchase, and has not yet returned to profitability. Google bought the company primarily for its patent portfolio, most of which it will be retaining.
Lenovo says that it is likely to take 12-18 months to get Motorola’s finances back into the black, but that they are confident this will be achieved following recent changes in leadership.
With the Motorola acquisition, we can become an even stronger global player. Motorola’s business is very complementary to Lenovo’s smartphone business. They are strong in North America and Latin America. Their new products are showing some strong results in Western Europe and India too. When the two companies are combined we will definitely become a more competitive player in most of the key markets.