Lenovo optimistic despite $714m loss

Enterprise Business Group grows five and a half times in a year thanks to System X integration

Lenovo has boasted "strong" operational performance in Q2 despite making a $714m (£470.1m) loss, claiming a combination of integration expenses and global cost reductions were mainly to blame.

In its second quarter, which ended 30 September, Lenovo made a $714m net loss on sales which rose 16 per cent annually to $12.2bn. In constant currency, sales were up 23 per cent.

Its Enterprise Business Group grew a massive five and a half times over the period to $1.2bn, thanks to the integration of the former IBM System X business, and its Mobile Business Group grew 104 per cent to $2.7bn due to the inclusion of Motorola. But it was a different story for its PC group, where sales fell 17 per cent annually to $8.1bn due to foreign exchange issues affecting demand in EMEA and Brazil.

Across EMEA – which accounts for more than a quarter (26 per cent) of its global revenue – sales rose six per cent to $3.2bn.

"Lenovo was a solid number two in the PC market overall, growing market share to 19.9 per cent," Lenovo said of its EMEA performance. "In consumer PCs, it was number one for the seventh consecutive quarter, clocking 21.5 per cent share."

Lenovo said the business as a whole is performing well, despite the losses.

"The... losses were driven by the realignment plans Lenovo disclosed during its Q1 results, including worldwide expense-reduction actions across all businesses, the integration of the System X Business, the organisation and brand alignment of Motorola and the Lenovo Mobile Business Group, and clearance of smartphone inventory," the firm said in an announcement.

"Going forward, these actions are intended to drive meaningful run-rate cost savings of about $650m in the second half of this year and about $1.35bn on an annual basis. Lenovo's cost structure, across all its core businesses, is now among the most competitive in the industry. The company is in a position to invest in new areas, while aggressively attacking competition."