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Lenovo CEO Vows To Turn Around Motorola in 6 Quarters

Lenovo CEO Vows To Turn Around Motorola in 6 Quarters
February 27, 2014 10:25AM

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Investors shouldn't be scared by Motorola's $1 billion loss in 2013. Lenovo, which just purchased the Motorola Mobility smartphone business from Google, said it will improve that even from day one. Google is very good at software, ecosystems and services, but Lenovo is stronger in the manufacturing of devices, said CEO Yang Yuanqing.

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Lenovo’s CEO is oozing confidence about the company’s chances of turning Motorola around. In fact, Yang Yuanqing predicted the handset maker would return to profitability in the next four to six quarters.

Lenovo acquired the Motorola Mobility smartphone business from Google for $2.91 billion. The deal includes a portfolio of smartphones like the Moto X and Moto G and the DROID Ultra series. Lenovo will take ownership of the future Motorola Mobility product roadmap.

With a strong PC business and a fast-growing smartphone business, Lenovo expects the deal to strengthen its position in the handset market. With Moto, Lenovo automatically gains a strong market presence in North America and Latin America, as well as a foothold in Western Europe, to complement its business in emerging markets around the world. But will that be enough to return the company to profitability?

Don’t Be Scared of the Loss

According to Bloomberg, Yang believes so -- and he plans to do it without cutting jobs. That’s no small promise, considering Motorola reported operating losses totaling more than $1 billion in 2013, Bloomberg's data reveals.

“Don’t be scared by the $1 billion-a-year loss,” Yang told Bloomberg. “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.”

Yang is betting, in part, on synergies from buying IBM’s PC business and brand in 2005 and the recently announced acquisition of Big Blue’s low-end server business. But with smartphone market expected to decline, according to IDC, will Lenovo revive Motorola in time?

Targeting the Low End

Despite the high growth expected in many emerging markets, 2014 will mark the year smartphone growth drops more significantly than ever before, with only a 19.3 percent year-over-year growth, according to the firm’s Worldwide Quarterly Mobile Phone Tracker.

Of course, that’s just IDC’s take. On Wednesday, Yankee Group’s Carl Howe told us his data doesn’t offer evidence to support IDC’s numbers. Gartner, meanwhile, is looking at growth in emerging markets.

We caught up with Michael Disabato, managing vice president of network and telecom at Gartner, to get his take on the low-end smartphone scene. From Mobile World Congress in Barcelona, he told us Nokia, Motorola and others have announced smartphones targeted at developing and emerging economies.

“They are going for around $25 to $100. If they take off, the growth may stay where it is,” Disabato said. “The ‘developed’ nations are reaching -- or have reached -- the saturation level for these devices, and any significant sales may result from a significant innovation from someone.”

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