The Chief Executive Officer of Lenovo Group Ltd. – Mr. Yang Yuanqing – said that the company, which is acquiring Google Inc.s Motorola Mobility unit, plans to make it profitable within four to six quarters without layoffs.
Yesterday Chief Executive Officer Yang said in an interview at the Mobile World Congress, which was cited by Bloomberg: “Dont be scared by the $1 billion-a-year loss. We will improve that even from day one. Google is very good at software, ecosystems and services. But we are stronger in the manufacturing of devices.”
As reported by Bloomberg, Mr. Yang also announced that the acquisitions of Motorola Mobility unit and the low-end server business of International Business Machines Corp. for a total of 5 billion dollars, will help the company overcome the declining personal computer market and expand its reach. Both the purchases are larger than any other finalized by Lenovo Groups Chief Executive Officer before and will challenge Mr. Yangs capabilities to find the necessary cost savings to make the divisions profitable and work with the new teams.
According to data compiled by Bloomberg, the operating loss of Motorola Mobility for 2013 were estimated to 1 billion dollars. Lenovos efforts to turn Motorola profitable will begin as soon as the deal is completed, for which Yang said he is optimistic the company will receive regulatory approval.
Mr. Yang also commented that increased production and sales are expected to bring an improved profitability as the company aims at emerging markets. Lenovo Group Ltd is also currently trying to minimize internal communication and computing services costs. Yang described the gross margins of the Motorola Mobility unit as “pretty decent”.
The plans of Lenovo to acquire the low-end server business of International Business Machines Corp. in a 2.3-billion-dollar deal were announced on January the 23rd. Only a week later the company made another official announcement, saying that it is about to purchase Google Inc.s Motorola Mobility unit for 2.91 billion dollars.
Alberto Moel, who is one of the analysts working for Sanford C Bernstein & Co. commented for Bloomberg: “People are very worried that the visibility of Lenovo as an investment is out the window. We dont know what the impact will be of these deals on the financials.”
According to estimates by Kirk Yang, an analyst at Barclays Plc, Lenovo Group Ltd is able to “easily” cut 70% of the operating expenses of the Motorola business. Mr. yang refused to make any comments on that estimate.
Lenovo Group Ltd fell by 1.03% in Hong Kong to 7.72 HKD, a seventh straight daily decline, trimming the companys market value to 80.3 billion HKD.
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