Lenovo has reported $10.7 billion in revenue for Q1 ended June 30, 2015 for FY 2015-16, a mere three percent increase year-over-year. The company’s net income declined 51% year-over-year to US$105 million.
Lenovo posted a steep decline in sales for its mobile division, reflecting intense international competition on the smartphone market. It announced plans to lay off about 10 percent of its global non-manufacturing workforce which is about 3,200 jobs as part of cost cutting measures aimed at saving $650m in 2015. Lenovo’s mobile division recorded a pre-tax loss of $292 million in the three months to end June, while Motorola’s shipments stood at 5.9 million units, a 31 percent decline from a year prior. The company will incur restructuring costs of approximately $600 million and additional spending to clear smartphone inventory of approximately $300 million.
The company’s gross profit for the first fiscal quarter increased 22 percent year-over-year to US$1.6 billion, with gross margin at 15.4 percent. Operating profit for the quarter declined 67 percent year-over year to US$96 million. Chief executive Yuanqing Yang said Lenovo would also restructure its lagging smartphone business at a one-time cost of $600 million and was facing its “toughest market environment in recent years”. Lenovo revealed that its PC business reached a worldwide share of 20.6%, with a 13% share in the US market.