Lenovo Posts Surprise Loss as Mobile Unit Struggles Continue

Lenovo posted a surprise loss after taking a $400 million charge due to U.S. tax reforms as its mobile business continues to struggle with shrinking revenue, according to Bloomberg.

The world’s second-largest PC maker reported a $289 million net loss in the three months ended December. Lenovo’s struggles in smartphones, where its getting squeezed by rivals and higher component prices, are overshadowing improvements in its data center and PC divisions. CEO Yang Yuanqing doesn’t expect the business to break even in the second half with more time needed to turn around a unit that has yet to make money from its 2014 purchase of Motorola Mobility for $2.9 billion.

Total operating income was $204 million, compared with the $201 million projected, while revenue increased 6 percent to $12.94 billion. Sales from the mobile business fell 5 percent in the quarter and the division had a pretax loss of $92 million after excluding accounting charges.

PC unit sales rose 8 percent with a pretax profit of $416 million. Worldwide PC shipments rose during the December quarter for the first time in six years, albeit less than 1 percent. But HP widened its lead over its closest rival, according to IDC. Lenovo swallowed a one-time charge of roughly $400 million as a result of the Trump administration’s tax overhaul, though it said the reforms may result in a lower tax rate for its U.S. operations in the longer term.