Lenovo stays in black despite Motorola buy

Lenovo Group Ltd said on Tuesday it had dodged a widely expected profit slump in the fourth quarter, after its acquisition of Motorola Mobility LLP at the turn of the year.

The world's largest personal computer maker released a longer-than-normal financial report for the October-December period because two major acquisitions, valued at more than $5 billion, were completed during the three months.

Net income generated from daily operations, mainly PC, server and smartphone sales, hit $327 million, up by 23 percent year-on-year, according to Yang Yuanqing, chairman and chief executive.

The figure countered earlier analyst estimates that had suggested buying the previously money-bleeding Motorola unit from Google Inc would only result in many quarters of poor performance.

Even though net income, after deducting merger-related accounting charges, was down by 5 percent compared to a year ago, Yang hailed the quarter as "extremely successful".

"We are at the starting line of a new race, but the results show that we have the right strategy, we made the right acquisitions and we executed well globally, so I am confident we are ready to win," he said.

The better-than-expected result sent shares in the Hong Kong-listed company 7.3 percent higher on Tuesday.

Strong PC and Motorola smartphone sales pushed total revenue to $14.1 billion in the period, a 31 percent jump year-on-year, the financial report showed.

Motorola is showing strong signs of a comeback since the Chinese company completed its $2.9 billion acquisition late last year. Globally, the company shipped more than 10 million devices in the fourth quarter, a 118 percent rise year-on-year.

Liu Jun, Lenovo's senior vice-president who also oversees mobility business, said orders of Motorola phones have exceeded 1.3 million units in the country so far.

More than a year after retreating from China, Motorola announced plans to re-enter the world's largest handset market last month, targeting mid-and high-end buyers. Lenovo has said it expects Motorola to be profitable again within six quarters.

Nicole Peng, research director at Canalys China, said the Motorola acquisition will prove a good investment decision for Lenovo, given its improved performance and brand position in 2014.

Lenovo's challenge, she said, is to continue driving the momentum of the Motorola brand while finding the sweet spot for its own Lenovo brand.

Motorola now operates as a separate smartphone brand worldwide while Lenovo set up its own smartphone product line years ago.

"It will be a critical year for Lenovo, to execute a dual-brand strategy which has not yet been proven successful in the smartphone world," she said, adding Motorola will still find it difficult to compete against Apple Inc in the high-end market.

Huge sales of Apple's new iPhone 6 and 6 Plus helped the US giant become the top smartphone maker last quarter, according to Canalys figures. Budget phone maker Xiaomi Corp also outsells Lenovo in the lower-end market.

Liu from Lenovo said the company will focus on online sales to lift smartphone shipments in China. Previously, the company relied on telecom carriers for handset sales, but dramatic cuts in contract phone subsidies from carriers hurt Lenovo's sales last year.

gaoyuan@chinadaily.om.cn