Lenovo Shipped Record 18.7M Smartphones in Q4 2014, But Profit Dropped 37%

Lenovo just completed its first full quarter of business as the owner of Motorola and, with its $2.91 billion acquisition from Google under its wing, the Chinese company shipped a record 18.7 million smartphones in its most recent Q4 2014 quarter.

That figure included 7.8 million smartphones from Motorola, and represented an increase on the 16 million devices that Lenovo shipped in the previous quarter. For its entire year, the company said it shipped a best-ever haul of 76 million smartphones.

Lenovo hit records in other areas, too. It shipped a record 60 million PCs during its 2014 financial year, marking the first year that its smartphone shipment volume beat that of its PCs.

A Company in Transition

Yet, despite impressive unit figures, this is a company in transition. Lenovo’s quarterly profit plunged 37 percent during the quarter — which was also the company’s first full quarter in charge of the server business it bought from IBM for $2.3 billion. The Chinese firm’s revenue for Q4 2014 rose 21 percent year-on-year to $11.3 billion, but the firm posted a slim $100 million net profit, down 37 percent from one year previous.

It was a similar story for the company’s year-long 2014 financials. Revenue came in at $46.3 billion, up 20 percent, but annual profit was $829 million, down from $5 billion in the previous financial year.

Lenovo has consistently maintained its position as the world’s top PC seller, and a top five spot in the corresponding smartphone chart, but that belies a change in the company’s business model.

The firm is shifting its focus as global demand for PCs continues to decline and smartphone ownership begins to reach saturation point in key markets — sales recently contracted in China, Lenovo’s biggest market, for the first time in six years. The future of Lenovo, the company said, is about going beyond hardware.

“In view of the opportunities and challenges of the new Internet+ era, we are ready to transform ourselves from making mostly hardware to a combination of hardware and software services,” Lenovo Chairman and CEO Yang Yuanqing said in a statement. “This will spur a new wave of growth for Lenovo in the coming years.”

Having already spent close to $5 billion on just two major acquisitions in the consumer and enterprise spaces, Lenovo seems likely to get its checkbook about again in a bit to build up the digital side of its business.

Update: As pointed out in comments, Lenovo’s record on software these past few months has been pretty disastrous and is also worth highlighting, particularly given its focus on software.

Not only was the company found in February to be shipping sketchy adware that posed a security to risk to buyers of its consumer PC range, but a further scandal broke out in May, when researchers identified three major vulnerabilities within other Lenovo software.