What next for Lenovo?
Lenovo’s mobile division is reportedly "on track" to turn a profit by December at the earliest due to strong growth abroad, according to chairman Yang Yuanqing. The company also recorded a 67 percent fall in quarterly earnings.
Yuanqing also made it clear that the company would not be selling the embattled business arm to focus on the PC market where Lenovo is the world's biggest maker by shipments. Kamel Mellahi, Professor of Strategic Management Warwick Business School, said, "Lenovo’s management has confirmed that it does not intend to exit from the mobile handset business despite its disappointing performance. I think ruling out divestment from the mobile-handset business is unwise.
"The decision risks locking Lenovo into a course of action regardless of the evidence. Lenovo is going to face a lot of headwind in the coming months and there are no indications that this is going to change in the short and medium terms.
"One thing for sure - Lenovo is facing a bumpy road ahead in the mobile-handset business. Yes the macroeconomic environment is challenging and the prices of key components have rocketed, but such external factors should not distract Lenovo from the fact that since buying Motorola's mobile-handset business in 2014, it hasn’t positioned itself effectively to compete in the sector.
“Newcomers to the industry are out-competing established players such as Lenovo with more affordable high-quality alternatives."