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Lenovo reports its first annual loss in six years

Lenovo purchased Motorola's smartphone business from Google for $2.91 billion in 2014 in an effort to expand its business as growth in the PC market has slowed significantly. However, the company did not foresee how difficult it would be to integrate the handset manufacturer into its business.

Yang Yuanqing, the CEO of Lenovo, admitted in a recent interview that his company his facing a number of challenges with its smartphone business. The company also reported its first annual loss in six years which it attributed to slow PC sales and competition in the Chinese smartphone market from Huawei and Oppo, both of which gained significant market share in the country during Q1 2016.

Weaker demand for Lenovo's phones in China and the US lead to its smartphone shipments falling 13 per cent during 2015's fiscal year. Overall its worldwide market share lost 1.1 percentage points to end the year at 4.6 per cent and its mobile division saw a loss of $469 million.

Yang added further insight to his company's position in its home market: “The market is shifting from the operator's market to an open market, and unfortunately we haven't built that solid foundation.”

Lenovo has a much smaller presence in the US smartphone market and by acquiring Motorola it was able to boost its market share to 5.2 per cent during 2015. However this still pales in comparison to Samsung's 22.7 per cent and Apple's 16.2 per cent.

The loss in market share and slow PC sales led Lenovo to post a net loss of $128 million in 2015 which is quite different from its profit of $829 million during 2014. Its revenue also decreased from $11.3 billion during 2014 to $9.13 billion at the end of last year.

Yang expects short term losses at the company's mobile division but believes that it will eventually turn things around. To help spur the growth of its smartphones in the US, Lenovo is preparing to launch two high-end smartphones on June 9th one of which will be a Motorola phone and another that will utilise Google's Tango platform.

Hopefully these new devices help the company grow its US market share and make Motorola the popular Android brand it was under Google.

Image Credit: Julia Kuznetsova / Shutterstock

Anthony Spadafora
After living and working in South Korea for seven years, Anthony now resides in Houston, Texas where he writes about a variety of technology topics for ITProPortal.