Lenovo Group said it would miss a target to turnaround its mobile business by March, after earlier posting a quarterly loss. On the other hand, the company's core PC and smart device business is growing.
The company phone problems started after it bought Motorola Mobility from Google for $2.9 billion in 2014 but struggled to integrate the assets.
"We will further improve the profitability, but probably breakeven will not happen in the next quarter," Chairman and CEO Yang Yuanqing told Reuters, referring to the mobile business.
Lenovo's Mobile Business Group (MBG), which accounts for 16 percent of the company's revenue, reported a narrower operating loss of $92 million for the third quarter ended December. Lenovo says it takes a long-term view of this business and believes that the right strategy is in place to deliver short-term improvements and sustainable growth in the long-term. Latin America continues to be a stronghold, outgrowing the market by almost 30 points year-on-year. Lenovo said that 5 million Moto Z handsets have been shipped globally, with activation rates for MODS up 64% year-to-year.
Lenovo also saw the Moto brand strengthen in Western Europe, with shipments up 23 percent compared to the same period a year ago.
The company's core PC and smart device business, however, grew in terms of revenue in the third quarter. During the quarter, the company enhanced its momentum in emerging technology areas, including Augmented Reality (AR) and Virtual Reality (VR). The segment, accounting for over 70 percent of Lenovo's top line, saw an 8 percent rise in revenue over the period, despite a 0.2 percentage point year-on-year drop in market share, thanks to premium products such as datachables.
Lenovo's overall revenue for the October-December period came in at a three-year high of $12.94 billion, up slightly from $12.17 billion a year ago.
Its bottom line for the period, however, swung to a loss of $289 million, versus a $98 million profit a year ago, dented by the one-off charge of $400 million linked to a reassessment of U.S. deferred tax assets.
On Lenovo's data center business, which saw a narrower loss of $56 million on a 17 percent year-on-year revenue increase in the quarter, Yang said it was "well on track to deliver a turning around".
"Lenovo is accelerating its transformation to become a world leader across every part of our business. We continue to see significant improvement and strong performance in some of the most exciting technology market sectors, smart devices and data center. We saw revenue, margins, profit, innovation, performance and customer experience all extend the momentum that developed during the prior quarter, and these results reaffirm the transformation strategy we are executing," said Yang Yuanqing.