Lenovo 2015 Q1 results show a 52 percent drop in profits

Lenovo is currently facing a rough quarter as Chairman and CEO Yang Yuanqing had to announce in front of a panel of investors its less-than-stellar Q1 2015/16 financial performance. In particular, the declining PC market and the intensely crowded smartphone market have both caused a drastic drop in profits for the Chinese manufacturer.

June 30, 2015 ended the first quarter for Lenovo's FY 2015/16 calendar. The manufacturer saw a slight increase in sales of 3 percent from $10.395 billion USD (FY 2014/15) to $10.716 billion. Profits, however, decreased from $211 million to $102 million during the same time period for a 52 percent drop. Operating profits have also decreased from $291 million to just $96 million.

Lenovo PC Group (PCG) reported sales revenue of $7.28 billion USD, which is down 12.6 percent from last year's $8.33 billion. Shipments also fell last quarter by 7.1 percent. Nonetheless, the PC segment made a profit of $368 million before accounting for taxes. Lenovo's mobile sector saw revenues increase by 33 percent to $2.114 billion, which can be attributed to strong performance outside of China. The manufacturer managed to ship 16.2 million smartphones and 2.5 million tablets during the quarter.

Yang Yuanqing has informed all employees via email about the drastic forthcoming restructuring plans. The manufacturer is expecting to layoff 3200 non-manufacturing employees by the end of this current second quarter. This is expected to save Lenovo $650 million for the rest of 2015 while the restructuring itself is estimated to cost $600 million.

Source(s)