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Lenovo's Motorola purchase not paying off

Sales from its Motorola's phone business "did not meet expectations" in the last quarter, says Lenovo.

Motorola phones aren't contribuing enough to Lenovo's sales, says the company.

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Lenovo's integration of Motorola is not going as well as hoped for.

On Thursday, Hong Kong-based Lenovo released its earnings and revenue for last quarter. The company said its Motorola segment contributed almost 5 million units in phone sales, while kicking in $1 billion in revenue to Lenovo's Mobile Business Group, which includes phones, tablets and smart TVs.

Motorola's numbers don't sound terrible considering that Lenovo sold a total of 10.9 million smartphones for the quarter, while overall revenue for the Mobile Business Group was $1.7 billion. But the results from Motorola were lower than the same quarter last year when it contributed more than 7.8 million in smartphone unit sales and delivered $1.8 billion in revenue to the Mobile Business Group.

Lenovo is a top player in the PC world, but the smartphone market has become a tougher nut to crack. Smartphone ownership has reached a saturation point in major regions across the world, while Apple and Samsung continue to dominate the market, leaving little but scraps left over for other manufacturers.

The integration of Motorola, which Lenovo officially acquired in October 2014 for $2.91 billion, isn't going as smoothly as Lenovo would like. Smartphone shipments in Lenovo's home base of China dropped by 85 percent last quarter, and the Motorola handsets sold in the United States didn't lure in enough buyers.

"These results show integration efforts did not meet expectations," Lenovo said in a press release.

The company said it's learned a lot since closing the Motorola purchase and is using its new knowledge to take action in its "organization, leadership and approach." Calling China the most competitive market, Lenovo said it plans to revive growth in the country by continuing to shift from its reliance on carriers selling phones to selling phones itself on the open market where consumers can choose their own carrier.

Lenovo has two co-presidents, one focused on China and the other focused on the rest of the world, both of whom "now have the right focus," Lenovo said. Looking beyond China, Lenovo said it "will maintain high growth in emerging markets and get the US business back on track with a competitive product portfolio."

In January, the company said it was phasing out the Motorola name and unifying its two phone businesses under the Lenovo name. The Motorola Moto brand would be used for high-end products but with the Lenovo name added, while the homegrown Vibe brand would be applied to budget devices.

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