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Business

Lenovo's bottom-line bleeds as restructuring bites

The world's biggest PC maker has posted its biggest-ever quarterly profit loss as shrinking demand for personal computers left a big dent in the company's earnings. But its pivot to mobile appears to be paying off.

Strong mobile sales could make up for stinging losses in other areas as the Chinese technology giant reported a net loss for its fiscal second quarter of $714 million (666 million euros) on Thursday, down from a net profit of $262 million in the same period a year ago.

The shrinking demand for personal computers hit the world's biggest PC maker particularly hard, as sales dropped to 15 million units, down 17 percent year-on-year at $8.1 billion.

Further weighing down the company's bottom line were one-off charges of about $900 million in smartphone inventory clearing and restructuring costs.

The future is mobile

Overall, however, Lenovo fared better than most analysts had forecast, with many projecting a loss of $787.8 million.

The news comes as Lenovo has launched a huge overhaul of its business strategy, seeking to diversify into other sectors, including the smartphone market. To that end, the tech firm last year made two multi-billion-dollar acquisition,

buying Google's Motorola handset unit

and IBM's low-end server business.

That strategy appears to be paying off as second-quarter mobile business sales shot up 104 percent year-on-year at $2.7 billion. The Beijing-based firm said it sold 18.8 million mobile units, an increase of 11 percent compared to the same period last year driven by growth outside China.

"In mobile, our strategy to shift our growth focus to outside of China continued to pay off, and we gained share and improved margin," Lenovo chairman Yang Yuanqing said in a statement on Thursday.

Despite the overall profit loss, the company said it remains optimistic about the future. In August, Lenovo announced it expected bolster its bottom line by slashing annual operating costs by $1.35 billion and cutting 3,200 staff from its non-manufacturing workforce - around five percent of its worldwide headcount.

"Going forward these actions are intended to drive meaningful run-rate cost savings of about $650 million in the second half of this year and about $1.35 billion on an annual basis," the firm said.

pad/hg (AFP, Reuters)

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