Lenovo's Q3 net income declined 4.6 percent to US$253 million, but the company came in better than expected after its Motorola acquisition. Profit after sales in its smartphone division more than doubled as the company expanded its footprint in the smartphone market.
The China-based PC giant announced that net income for the quarter ending December 31 was US$253 million, a 4.6 percent decline from the US$265 million recorded a year ago -- but better than the US$182.4 million average analysts' estimates.
After buying Motorola last year and IBM’s x86 server business, the third quarter of last 2014 represented the first financial result of the company’s progression beyond PCs.
Lenovo's mobile unit, which includes products from its acquisition of Motorola Mobility, topped 10 million smartphone shipments for the first time. The unit, which also includes Android tablets and TVs, recorded sales of US$3.4 billion in the quarter, an increase of 118 percent from the year-ago period. Combined with the Motorola unit, Lenovo had a 6.6 percent global market share, a 78 percent increase over the previous year's quarter.
The company expects the Motorola unit to return to profitability in the next four-to-six quarters, thanks largely to its re-entry in the China market. Lenovo, already the number two smartphone maker in China, is positioning Motorola to compete with high-end smartphone makers Apple and Samsung.
Lenovo's PC unit, which typically accounts for most of the company's revenue, shipped 16 million units in the quarter, a 4.9 percent increase over the same period a year earlier. The company commands a 20 percent share of the market but expects consolidation for the quarter.
"This quarter, 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," Lenovo CEO Yuanqing Yang said in a statement. "The two newly acquired businesses are achieving great momentum in their first quarter of integration. They are definitely becoming our growth engines."
Companywide, Lenovo's revenue came in at US$14.1 billion, a 31 percent increase over the 2014 financial year Lenovo's US$2.1 billion acquisition of IBM's x86 server lineup put Lenovo in third place in the worldwide x86 server market behind HP and Dell. Yang said last year that the deal opened a new "growth engine" for his company and that he expected the x86 server business to generate sales of US$5 billion in its first year.
Along with Lenovo's US$2.9 billion deal to buy Motorola and its smartphone business, he said the moves achieved the goal of expanding the company's grip in three key markets - PCs, servers and smartphones.