Lenovo, which has seen its share of the mobile phone market slide in recent quarters, is reorganizing its mobile operations and shifting responsibility for its smartphone business to the Motorola Mobility division.
The streamlining move comes less than a year after the Chinese system maker bought Motorola from Google for $2.91 billion in an effort to rapidly grow its mobility capabilities in an increasingly competitive global market.
Chen Xudong, senior vice president at Lenovo and president of its Mobile Business Group (MBG), said in an open letter on Sina Weibo, a Chinese messaging service, that the restructuring is aimed at enabling the company to create better products, leverage what both Motorola and Lenovo have to offer, and “achieve profitable growth, not just simply expand … market share. [A] price war will not bring success.”
The company also will leverage both the Lenovo and Motorola brands to “play to their strengths in different markets,” Chen wrote.
Motorola will assume smartphone design, development and manufacturing responsibilities, and Lenovo will use its existing sales force to promote and move the devices.
In an emailed statement to technology news site NDTV Gadgets, a Lenovo spokesman said that former Motorola President Rick Osterloh “will be the leader of the combined global smartphone business unit, which will be under Motorola legal entities. MBG will continue to drive Lenovo’s overall mobile business, but will now rely on Motorola to design, develop and manufacture smartphone products.”
Lenovo made significant financial bets last year, not only buying Motorola but also acquiring IBM’s x86 server business for $2.1 billion. Both moves were made to quickly grow Lenovo’s presence in the data center and mobile device markets. It’s worked to a great extent in the data center space, where according to IDC and Gartner analysts, the company saw server revenue growth of as much as 556 percent, and Lenovo officials earlier this month said second-quarter sales in the company’s Enterprise Business Group increased 5.8 times over the same period last year due to the inclusion of the System x products acquired from IBM.
However, Lenovo—the world’s top PC maker—has struggled in the mobile device space. According to IDC analysts, Lenovo in the second quarter was the world’s fifth-largest smartphone maker, behind Samsung, Apple, Huawei Technologies and fast-moving Xiaomi, with 4.8 percent market share. Lenovo officials said this month that during the quarter, Motorola contributed $1.2 billion to the MBG’s overall $2.1 billion in sales. Lenovo sold 16.2 million smartphones during the quarter—a 2.3 percent year-over-year increase—but its market share fell by 0.5 percent.
Lenovo officials in a statement pointed to tough competition and a “rapidly changing technology landscape” for its market share loss. They also talked about restructuring MBG to better align with the Motorola business, saying that a “faster, leaner business model will better leverage Lenovo’s global sales force and accelerate the efficiency actions already underway in its global supply chain.”
In addition, the company announced that it will reduce its overall workforce by 5 percent, shedding 3,200 jobs, some of which will be in the mobility business.
Despite the struggles, Lenovo’s Chen noted that while the smartphone space is a crowded and competitive one, “the market structure is still evolving, and there is not an established pattern to win. I am convinced that we have a chance to win.”
The restructuring efforts will help reach that goal, he said.