Even Lenovo and Motorola can’t figure out how to make money on smartphones

It turns out that HTC is not the only overseas smartphone manufacturer that plans to cut jobs. On Thursday, Lenovo announced that it will reduce the size its white collar workforce by 10 per cent following a fiscal quarter in which it recorded a pre-tax loss of $292-million USD.

All told, the Chinese multi-national is expected to reduce its corporate headcount by some 3,200 jobs at a cost of $600-million USD. Lenovo says the measure will save it $1.35-billion over the next several years.

The decision to restructure the company comes after its Q1 net profit fell to $105-million USD, a drop of 51 per cent year-on-year. Lenovo is blaming its poor performance of its smartphone division for the loss. Motorola, which Lenovo purchased just under two years ago for $2.91-billion, shipped 5.9-million smartphones in the three months between April and June, a decrease of nearly 30 per cent compared to the same time last year. In addition, Lenovo wrote down $300-million in unsold smartphones , though it’s not clear from the company’s financial report if those were its own smartphones or ones designed by Motorola.

Lenovo’s share price dropped almost 9 per cent as a result of the news, with many investors raising doubts over whether it was worth it for Lenovo to purchase Motorola at all.

“I still believe mobile is a new business we must win,” said Lenovo CEO Yang Yuanqing in an interview with Reuters following the announcement of his company’s results. “I still believe [the Motorola] acquisition was the right decision…Except Apple and Samsung there is no third strong [global] player. I believe that will be Lenovo.”

What this news serves to underscore is that the growth of the smartphone industry has been a boon for only a couple of companies. For the most part, the only company that makes money off of selling smartphones is Apple, which makes 92 per cent of the profit in the industry.