Lenovo admits its Motorola business ‘has not met expectations’

Lenovo has admitted that it has failed to build on its acquisition of Motorola. The Chinese firm acquired the phone-maker from Google for $2.91 billion in late 2014 and, in its end-of-year earnings report published today, it said the post-deal performance “did not meet expectations.”

That admission underscores why Lenovo plans to phase out the Motorola brand, as it revealed earlier this year, and instead focus on utilizing its own branding. (And perhaps even Razr?!)

Lenovo shipped 66.1 million smartphones over its full-year 2015/2016 and 10.9 million devices in the final quarter of the period. The firm said that Motorola devices contributed just five million to that quarterly tally, and that’s below its target.

“These results show integration efforts did not meet expectations. In particular, China shipments declined 85 percent as the business shifted focus to open market and higher price bands and product transition in North America was not successful,” Lenovo said.

The firm, which commands the top spot on PC shipments with 21 percent of the shrinking market, said it had learned lessons from its work with Motorola. It restructured its business in March, appointing two co-CEOs for its mobile business — one focused on China, where it has suffered particularly badly, and another for the rest of the world.

“China is still the most competitive market and Lenovo intends to return to growth there by continuing to drive the shift from carriers to open market and leveraging its ZUK brand to rebuild its end-to-end competitiveness. In [the rest of the world], Lenovo will maintain high growth in emerging markets and get the US business back on track with a competitive product portfolio,” Lenovo said today.

Lenovo closed its financial year with a net loss of $128 million on revenue of $44.9 billion, down three percent on the previous year. It posted a net profit of $180 million during its Q4, which was up 80 percent year-on-year.

The company said that changes made to streamline its business — including the layoff of 3,200 staff announced back in August — helped it save $690 million on costs during the second half of the year, and were a big reason for its fourth quarter profit.

Lenovo continues to dominate the PC industry but shipments have been slowing for more than a year, so the Chinese tech giant needs to unlock new areas of revenue growth to compensate. While its mobile business is wobbling, the firm claimed record share in tablets — ranked third with 11 million shipments over the past year — and a 73 percent growth in revenue from its enterprise business — including an all-time high $200 million from its cloud services arm.