Lenovo earnings: Profitability in smartphones, servers in 'near future', CFO says

Key Points
  • Lenovo reported a 4 percent decline in full-year revenues on Thursday.
  • CFO Wong Wai Ming told CNBC its loss-making mobile and data center businesses will be profitable in the "near future".

Lenovo, the world's largest maker of personal computers, is expecting profitability in its smartphone and server business where it has made large acquisitions, in the "near future", the company's finance chief told CNBC on Thursday.

The Chinese technology giant reported $9.6 billion in revenues for the three months ending March 31, a 5 percent year-on-year rise. For the full-year, however, revenue fell 4 percent to $43 billion. Meanwhile, profit for the full year was $535 million, a rise from the $128 million loss recorded in the previous fiscal year.

Lenovo's PC business, which represents around 70 percent of its total revenue, saw unit shipments decline 1 percent, a smaller fall than the overall global PC market which fell 2.4 percent year-on-year in the first quarter of 2017, according to Gartner.

"We are always doing our business at a premium to the market," Wong Wai Ming, chief financial officer of Lenovo, told CNBC in an interview on Thursday.

But in the past few years, the company has tried to expand its presence in two areas: smartphones and data centers. In 2014, Lenovo bought Motorola's phone business from Google, and that same year purchased IBM's x86 server business.

Lenovo's mobile and data center businesses have been struggling as the company looks to integrate the acquisitions to create synergies. But in the mobile business it saw an operational loss of $566 million, widening from the $469 million loss in the year before. And the data center group recorded a loss of $343 million.

'Lenovo is close to being in a death spiral'

Still, Wong said that the company is seeing improvements in both businesses.

"(The) smartphone business is different from PC likewise server business is different from PC, so it will take time for us to really understand the business, build a team, build the infrastructure and grow from there," Wong told CNBC.

"I think we are very very confident that this will come in the near future."

The CFO cited improvements in its smartphone business with the Motorola brand globally.

"Nothing will happen overnight, but we are very very confident that the two businesses … will become a profit engine in the near future."