The Strategist

Lenovo dropped Motorola brand

02/23/2017 - 13:41

Lenovo is creating Lenovo moto, a single brand for its smartphones. The manufacturer is stopping production of brands such as Motorola, and Vibe, announced executive director of Lenovo's mobile division.

Lenovo dropped Motorola brand
In 2014, Lenovo bought Motorola Mobility from Google. The deal amounted to $ 2.91 billion. According to Gartner, the combined company is not included in the top five of the world's leading smartphones manufacturers (3rd, 4th and 5th places are occupied by other Chinese companies - Huawei, Oppo and BBK).

Advent of smartphones under Lenovo moto brand instead of Motorola is unlikely to somehow affect sales of Lenovo gadgets. Many modern buyers put functionality and price on the first place, and name takes a back seat in the process of choosing a device.

Motorola used to be one of the most popular brands. However, arrival of iPhone and other devices dented the manufacturer’s position. In 2011, Motorola was split into two independent parts - Motorola Solutions and Motorola Mobility. Later, Google bought Motorola Mobility for $ 12.5 billion, and after that sold it to Lenovo for $ 2.9 billion in 2014.

The brand is unpopular, and this is the main reason of its failure. It was clear that the division was experiencing difficulties when Google purchased it. One of the main problems was bitter legacy of the past. Google could not lay off old employees, and neither could Lenovo. As a result, the brand’s performance has become even worse during past six years. The result is quite predictable - the brand is almost completely killed, there’s no value, and shareholders are demanding explanations. Perhaps the brand will be somehow kept afloat for two or three years, but its eventual dissolution is just a matter of time.

Recently, Lenovo Group presented results for the third quarter of the fiscal year, which ended December 31, 2016. According to the report, the company's revenue was $ 12.2 billion, 6% up compared to the same period of the previous year. The company's revenue before taxes was $ 101 million, 68% up yoy. The company's net profit decreased by 67% in the third quarter, to $ 98 million.

Gross profit in the third quarter of the fiscal year decreased by 15%, to $ 1.6 billion, compared to the previous year. Operating profit decreased by 64% to $ 138 million. Basic earnings per share in the third fiscal quarter was $ 0. 90 US cents, or 6.98 HK cents. Volume of net cash amounted to $ 155 million as of December 31, 2016.

The unit for the production of mobile devices, which includes the brands and the Lenovo Moto, quarterly sales in monetary terms amounted to $ 2.2 billion. This is 23% lower than in the same period last year, yet still 7 % higher compared with the previous quarter. Such a good performance is explained by significant improvement in the developed countries markets. Pre-tax profitability is negative -7.1% with an increase in 0.6% in comparison with the previous quarter.

During the third fiscal quarter, Lenovo shipped 15 million smartphones, which is 7% higher compared to the previous quarter. Volumes of Moto smartphones supplies increased by 20%. Comparing performance of the third fiscal quarter of this year with last year, we can notice a 12% increase in sales of Moto G smart phones, leveraged by growth rates in Latin America - 23%. In India, the third largest smartphone market in the world, the Lenovo proved to be a strong market player, seizing 9.9% of the market in the third quarter.