Motorola expected to cut 500 jobs at its Chicago HQ

Yesterday, Lenovo announced some rather poor financial results, the company’s mobile division posted a pre-tax loss of $292 million and saw a 31 percent decline in smartphone shipments year over year. As a result, Lenovo announced a major workforce lay off program which will see the company cut 10 percent of its non-manufacturing positions.

News from Crain’s Chicago Business, a local business publication, states that 500 of these jobs will be cut from Motorola’s HQ in Chicago. A little under 2000 people are employed at the Merchandise Mart, the location of Motorola’s new HQ, meaning that approximately 25 percent of the local workforce will lose their jobs, much higher than the 10 percent average that Lenovo announced yesterday.

“We will maintain a substantial employee base there, as well as our labs and design facilities … The Merchandise Mart continues to be our headquarters and will still be the hub for global R&D and home for our labs.” – Will Moss, spokesperson for Motorola

Motorola employed around 3500 staff around the world when Lenovo purchased the company from Google last year, at a cost of $2.9 billion. Lenovo hasn’t stated how many more jobs are to be cut from Motorola, but it is possible that it is looking to slim down the company as it further integrates Motorola into its core business.

See also: Lenovo believes Motorola was a smart purchase, despite falling profits71655

However, Lenovo has also stated that the Motorola brand will become the prime focus of its smartphone operations moving forward, with design, development and manufacturing duties all shifting over to the sub-brand. We will have to wait and see how these changes affect Motorola’s future smartphone product line-up.

Lenovo believes Motorola was a smart purchase, despite falling profits

The smartphone market has become an increasingly tough place to business during the past couple of years, with a slowdown in flagship smartphone demand and huge pressure on price in entry level markets. Many of the well-known smartphone brands have fallen short of their financial targets this year and the situation appears to be no different for Lenovo.

Lenovo has seen its smartphone shipments decline the most recent quarter, down 31 percent compared with a year earlier. The company managed to ship 5.9 million handsets in the second quarter, resulting in a pre-tax loss of $292 million for the mobile division.

Compounding the issue, Lenovo purchased Motorola for $2.91 billion last year in a bid to expand its smartphone business to new markets and to secure itself a position as a dominant player in the market. The large expense provided a temporary boost for Lenovo, which jumped up to third place in the global smartphone rankings following the purchase. However, the combined company has slipped back into fifth position this year, with a 4.5 percent share of the market.

The Motorola range remains popular and will be the focus of Lenovo’s mobile business going forward.

Lenovo cited poor sales in Brazil and China, as the markets continue to become even more competitive. The company says that it will be looking to regions outside of its home turf for additional growth. Although this raises a question about whether the expensive acquisition of Motorola was a worthwhile venture for Lenovo.

“I still believe this acquisition (Motorola) was the right decision…Except Apple and Samsung there is no third strong (global) player. I believe that will be Lenovo.”

Lenovo is also struggling with the decline in the PC market, which contracted by 11.8 percent in the second quarter of the year. Although its share rose slightly from last year, Lenovo shipments fall year over year for the first time since Q2 2013. Yang Yuanqing, Lenovo’s Chief Executive, stated that the past quarter was “the toughest market environment in recent years”.

As a result, Lenovo is planning to cut 10 percent of its nonmanufacturing positions, a total of 3,200 jobs. The company is looking to make $650 million worth of savings in the second half of 2015. Furthermore, Lenovo’s mobile business will undergo a restructure worth $900 million in the next quarter. The company is looking to clear stock and to put a bigger emphasis on its new Motorola brand.

Perhaps Motorola’s latest line-up of competitively priced smartphones will boost Lenovo’s revenue in the second half of the year?

Lenovo will rely on Motorola to design, develop and manufacture smartphone products

Lenovo announced their financial results earlier today, and while their mobile division technically lost $292 million USD, it wasn’t exactly because of recent acquisition, Motorola. In fact, Motorola’s smartphone revenue contributed $1.2 billion of the $2.1 billion total revenue from Lenovo’s Mobile Business Group (MBG), a fact that isn’t lost on Lenovo. To that end, Lenovo will rely on Motorola to “design, develop and manufacture smartphone products”, we’re assuming even Lenovo branded devices, as the company attempts to make the MBG profitable again.

Truth be told, Motorola’s performance was actually pretty average when you consider it as its own entity – its smartphone shipments were down 31% to 5.9 million and it’s struggled to capitalize on its usual markets, like Brazil. Lenovo described these challenges as “intensifying competition, long product development lifecycles with related inventory issues, macroeconomic issues in Brazil (a large market for Motorola), and a fixed cost structure that was out of balance with the losses incurred.” That sounds like a lot of systemic issues, so we hope Lenovo is able to help Motorola resolve these moving forward, because we sure as hell like their latest devices.

What do you think about the news that Lenovo will rely on Motorola to design, develop and manufacture smartphone products? Let us know your thoughts in the comments below.

Source: Lenovo via Phone Arena

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