Lenovo Group forecasts to end Motorola Mobility unit losses, re-establishes the brand in China

Lenovo Group Ltd posted a 29% growth in profit today. The company also announced that it forecasts to end losses at Motorola Mobility unit within a few quarters of completing a deal as it re-establishes the smartphone brand on the Chinese market.

Lenovo Group Ltd made an official statement today, saying the net income of the company increased to 265.3 million dollars in the three months ended December 2013 compared to a net income estimated to 204.9 million dollars in 2012. According to data compiled by Bloomberg, this surpasses analysts estimates of 243.7 million dollars. The sales of Lenovo increased by 15% from 9.36 billion dollars in 2012 to 10.8 billion dollars, beating analysts 10.5-billion-dollar estimates.

Yang Yuanqing, who is the Chief Executive Officer of Lenovo Group Ltd, said in a phone interview cited by Bloomberg: “In a few quarters we can turn around the business.” Mr. Yang also said: “We will relaunch and reintroduce the Motorola brand back to China and other emerging markets. We will compete in the premium market, but this is not enough, we will also compete in the entry level.”

Lenovo also revealed that it was negotiating with U.S. regulators and is doing everything possible in order to get approval to acquire Motorola Mobility unit from its current owner Google Inc. in a deal estimated to 2.91 billion dollars in cash and stock.

More than 5 billion dollars of deals were led by Chief Executive Officer Yang in January 2014 in order to help the company face the decreasing demand for personal computers, which is a market that brings about 80% of Lenovos sales.

The company also revealed that in addition to the planned purchase of Motorola Mobility in order to increase smartphone sales, it reached an agreement with International Business Machines Corp. to acquire its low-end server unit in a 2.3-billion-dollar deal that is considered to help Lenovo add some corporate customers. According to data compiled by Bloomberg, Motorola Mobility had operating losses estimated to more than 1 billion dollars last year. Lenovos Chief Executive Officer Yang said that this purchase adds new risks and challenges to the company as it is trying to consolidate the deal and increase sales.

One of the analysts, who work for Sanford C. Bernstein & Co. – Alberto Moel said in an interview cited by Bloomberg: “They basically are taking on a material headwind to profitability which will impact their results. For the next few quarters we will be seeing earnings coming down. The question is how bad those earnings will drop and how low they will go before they start rising again.”

Lenovo Group Ltd fell by 1.15% in Hong Kong on Thursday to 8.58 HKD. The stock has dropped 9% this year.