Good morning and good evening. Welcome to Lenovo's Q1 result webcast. This is Gary Ng, VP in investor relations at Lenovo. We will first have remarks by our Chairman and CEO, Mr. Yang Yuanqing, and our CFO, Mr. Wong Wai Ming. After that, we will take your questions. Now, let me turn it over to Yuanqing.
Hello, everyone. Thank you for joining us. I will first discuss our last quarter results, and then talk about some important strategic initiatives. Last quarter, we faced severe challenges in the markets. The PC market declined significantly, and faster than expected because of lower inventories ahead of Windows 10 launch and currency depreciation. The currency fluctuations and broad macroeconomic issues in Brazil and the entire Latin America constrained the growth and impacted the profitability of Motorola because of the higher concentration of its business there. In China, smartphone market shift from a carrier speeded up and competition become more intensified. In fact, it was perhaps the toughest quarter, especially for PCs, since the 2008 and 2009 global financial crisis. But Lenovo continued to deliver solid performance despite these challenges. Our PC business, still our solid core business, reached a record worldwide share while improving margins year-on-year.
Although revenue and profit declined with the market. In tablets, we outgrew the market by 12 points and narrowed the gap with top two. In our enterprise business, Lenovo ThinkServer business grow faster with revenue up 41% year-on-year, especially in China, where ThinkServer revenue were up 56% year-on-year. Lenovo regained number one in China's x86 server market. We have delivered the operational profit in the combined enterprise business for the third straight quarter. In smartphones, our strategic shift from China to rest of world has paid off. Our volume outside China is now 65% of the total, compared with 18% a year ago. Lenovo-branded smartphone outside of China grew volume by 68% year-on-year and was profitable. Our overall phone volume grow in Middle East Africa by 380%, Asia-Pacific by 82%, and East Europe by 36%.
In the biggest emerging markets, Brazil, Russia, and India, our overall market share reached 21%, 10%, and 6% respectively. And we ranked at number two, number two, and number five. But our Motorola business was affected by the macroeconomic issues in Latin America and other markets. This, coupled with its higher cost structure and longer product life cycle, has resulted in worse than expected losses and impacted our overall performance in profit. We will talk about our actions to fix this later. For Lenovo overall, revenue grew 3% year-on-year or actually 10% if excluding exchange rate impact, reaching $10.7 billion. Net income before M&A accounting charges was down 8% year-on-year to $196 million USD. Although these are pretty solid results in a tough environment, we realized we must act quickly, proactively, and decisively to meet these market challenges.
Our core PC business is strong and competitive, and our foundation is solid. But we must react to the faster than expected market decline and reduce fixed expenses in order to leverage industry consolidation to gain more share. We will keep raising the bar of efficiency for the industry and continue to deliver margin improvement so that this business can provide the capital for the growth of the new businesses. Mobile and enterprise businesses are new growth engine for our future, and their strategic importance remains unchanged. We are still in the process of aligning elements of the acquired businesses with our legacy business and building the right business model and cost structure. On one hand, I want you to understand that turning them into our profit pool still needs more efforts and will take some time.
On the other hand, we are fully aware that we must take immediate actions to deliver our commitments. We have made progress integrating enterprise business, but with the challenges in U.S. and other mature markets, we will do more and ensure we build a highly efficient cost structure to deliver the growth and profitability. We will invest in the fastest growth segments, high volume servers, hyperscale, and converged systems while improving our global sales force. We will further drive the hyper-growth in China and other potential markets. In smartphones, it's time. It's necessary to further align key elements of Motorola with Lenovo to leverage our complementary strength, to reduce redundancy, to cut costs and expenses, and to improve efficiency. We will build much simpler, more efficient organizations and processes, which will become our solid foundation to success.
Motorola will take the lead in product development, design, engineering, and manufacturing, while Lenovo will fully leverage our global sales force to drive growth. We will have a much simpler product portfolio and eliminate redundancies. After finishing this, it will help us save around $850 million per year. Totally, with these actions, Lenovo will reduce its workforce by about 3,200 people in non-manufacturing workforce worldwide, which increase to 10% of our total non-manufacturing workforce and 5% of our total population. Most of this will be completed in fiscal Q2. When this action is completed, we expect to deliver $1.35 billion of annualized savings in operating expenses with a restructuring cost of about $600 million, and materialize $650 million in savings for the second half of this fiscal year.
This is a tough but the right decision to improve our competitiveness and better focus our resources in this fast-changing market. We expect these efforts to help achieve our previous commitments. In PCs, our goal is still to achieve 30% market share. And in enterprise, starting from $5 billion yearly business, we want to deliver sustainable growth with good margin. In mobile, we remain firm to our goal of achieving breakeven in two to three quarters, and we aim at being a solid number three. More broadly, throughout the company, we are working on Lenovo's transformation through developing our unique competitive advantages. We are building our direct sales capabilities. We are combining our offline channel and service capabilities with online sales opportunities. We are exploring innovative ways of providing personalized and customized services to our customers.
I believe this is a right decision. I have confidence in the team's ability to precisely execute. We will continue to deliver meaningful innovation in our products after showcasing our forward-looking technologies at the Tech World, such as Smart Cast and Magic View. We will launch a new wave of Moto phones. You can look for us to make a splash at IFA next month in Berlin with a wave of new holiday PCs, tablets, and wearables. When we emerge from these actions, short-term and long-term, we will be a stronger company that has built unique competitive advantages, not only in efficiency but also in innovation. Now, let me turn it to our CFO, Wai Ming. Wai Ming, please.
Thank you, Yuanqing. I will take you through Lenovo's financial and operational performance in Q1 fiscal year 2016. Next chart, please. Our group revenue increased 3% year-on-year to $10.7 billion. Excluding the currency impacts, the group revenue was up 10% year-on-year. Gross profit increased 22% year-on-year, with margin improved to 15.4%, driven by better PC margin benefited from scaling and higher gross margin of newly acquired businesses. Operating expenses increased by 47% to around $1.6 billion. The increase in E/R ratio for the quarter is mainly driven by the two acquired businesses. We recorded net other non-operating expenses of $44 million, which mainly included the interest expenses from $1.5 billion five-year notes we issued in May last year, the RMB 4 billion note issued in this June, and the imputed interest expense from the Motorola deal-related promissory notes. PTI was $52 million.
We recorded a tax credit of $50 million for the quarter associated with the losses incurred in Motorola and System x businesses. Profit for the period was $102 million, and profit attributable to equity holders was $105 million. The difference between the two profit lines is due to the sharing of operating loss in relation to the Compal joint venture recorded in the quarter. Next chart, please. In this chart, we have provided a bridge to reconcile different financial figures to give you an overview on how these figures are calculated. The non-cash M&A-related accounting charges related to the two M&A transactions were $91 million, which include intangible asset amortization of System x and Motorola, imputed interest expense of the three-year promissory note issued as part of the Motorola transaction, and others. Next chart, please. There are no significant changes to our balance sheet since March 31, 2015.
The non-current assets were about $11.8 billion, and current assets were above $14.9 billion as of June 30, 2015. We had net current liabilities of around $1.3 billion at the end of the quarter, which was slightly lower than that in the March end. The non-current liabilities were around $6.4 billion. Next chart, please. We reported an operating cash flow of $310 million, which was driven by payments in Q1 for expenses accrued in last financial year, including year-end bonuses, taxation and business partner incentives. The cash conversion cycle for the quarter was positive five days against negative six days the same quarter last year and positive three days last quarter. The positive cash conversion cycle was driven by a higher mix of mobility and consumer businesses, which normally have longer receivable days.
We will take necessary actions to tighten up the credit periods for those businesses in order to achieve a better working capital performance. Next chart, please. PC business growth. We continue to outperform the markets even though the market continued to slow down and gain share in all geos. Our PC revenue decreased by 13% year-on-year to $7.3 billion. Excluding currency impacts, the revenue decline would be above 5% year-on-year. Pretax margin was up slightly to 5.1% and benefited from the effective margin management and scaling benefits while our PC ASP remained stable. Mobile business growth. Our smartphone business outside China, especially in the emerging markets, continued to record strong growth. But our legacy business in China was impacted by over-indexing in the carrier channels, as well as intense competition and tough market environments.
Motorola has a significant business in Brazil and Latin America, and its business was significantly affected by the weak economy as well as the depreciating currency in those markets. We remain number three tablet player worldwide. Shipment grew 4% year-to-year to 2.5 million, and our market share was up 0.7 points to 5.6%. For MBG, revenue increased 33% year-on-year to $2.1 billion, helped by the inclusion of the Motorola business. We recorded a loss before taxation of USD 292 million and a negative 13.8% pretax margin, largely due to the softness in markets where we have significant business as well as the relatively high fixed cost. Enterprise business growth. Revenue of enterprise business group showed an increase of 5.8 times year-on-year to $1.1 billion, helped by the inclusion of the System x business.
We recorded operational profits before the non-cash M&A accounting charges in the combined enterprise business for the past three straight quarters. Next chart, please. China. Revenue from China was $3.2 billion, down 16% year-on-year, while PTI was $133 million and operating margin was 4.8%, declined by 0.7 percentage point year-on-year, largely driven by the weak smartphone performance. We maintain a strong number one position in China PC despite market challenges while holding up margin. Our EBG revenue grew 235%, and we regained the number one position in the x86 server markets in China. Asia Pacific. Japan is a principal driver for the decline of the AP PC market. Not only the market was affected by the weak economy, Japan also enjoyed the benefit brought from having help from the Windows XP refreshment in quarter one last year.
We continued to grow PC units in other AP regions and gain share, particularly in the ANZ. Our smartphone business achieved strong growth in this region, including ASEAN and India, driven by substantial growth of the Lenovo brand phones and inorganic help of Motorola. As a result, our revenue in AP continued to grow year-on-year. While our PC margin improved year-on-year, the overall AP margin recorded a decline, mainly due to the challenges from Motorola. EMEA. The PC market in EMEA recorded a decline in quarter one as demand was impacted by the macro challenges and currency fluctuation. Our PC shipment and revenue were down as a result. Even though we continued to achieve share gain and year-on-year margin improvement. Our smartphone and enterprise business are still in the investment phase. We are seeing good progress in our Lenovo brand phone in EMEA.
Our EMEA revenue was down by 5% to $2.6 billion. Profit before tax was $40 million, and operating margin was 1.5%. Americas. Our PC unit shipments in North America remained strong with record high market share, driven by strong growth in consumer business. However, this strong performance was offset by slow performance in the challenging Brazilian markets. This weak macroeconomic environment in Brazil has also impacted our smartphone businesses, particularly the Motorola business in Latin America and Brazil, account for a substantial part of this business. America's revenue was up 46% year-on-year to above $3.3 billion, helped by the addition of System x and Motorola businesses. We recorded an operating loss of $131 million in the region, mainly attributable to the losses in Brazil and Motorola businesses.
As Yuanqing mentioned, we announced today our business realignment plan to enhance the company's overall competitiveness and to drive consistent, healthy, profitable growth in all of our businesses. The business realignment plan aims to reduce our annualized operating expense by approximately $1.35 billion, and we expect approximately $650 million of such savings realized in the second half of the fiscal year. As a result of the realignment plan, there will be a one-time expense expected to be charged in quarter 2, which comprises of approximately $600 million restructuring charges and approximately $300 million additional spending to clear our smartphone inventory. The actions taken under the business realignment plan will enable us to continue to maintain our profitability and gain market share for our PC business.
For EBG, we are on track to drive good operating margin with $5 billion annual turnover going forward. We continue to manage our MBG business to drive more efficiency and believe that the business can achieve an operational break-even position in about two to three quarters. We will continue to invest in areas we believe are important to us, and we remain committed to our protect and attack strategy to drive better return to our shareholders. Thank you. Now we can take your questions.
Thank you, Wai Ming. We now proceed to questions. To our Chairman and CEO, and Gianfranco, our Corporate President, and Wai Ming, our CFO, with us for their Q&A session. We want to accommodate questions from as many people as possible, so please avoid multiple questions and limit just to two questions at one time. Please state your name of company, before your questions. All the Q&As will be in English only. Operator, will you please give us your instructions?
Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on a telephone and wait for your name to be announced. If you wish to cancel the request, please press the pound or hash key. We have the first question coming from the line of Kirk Yang from Barclays. Please go ahead.
Yes, thank you. Hello, Yuanqing, Wai Ming and Gary. This is Kirk Yang from Barclays. I would like to ask you a question regarding your China business, please. As you can see, from the June quarter, the China sales were down about 16% year-on-year. For the current quarter, as you know, the Chinese economy remained pretty slow, and we have this currency devaluation. So maybe can you please give us some color of what might be expected given the current situation, and would the current weakness continue or maybe stabilize? Thank you.
Yeah. So Kirk, it is Wai Ming. I think the decline in the current quarter was primarily driven by the smartphone business in China. Going forward, obviously, as you mentioned that, I think the China economy remains slow. But we obviously will continue to have a very strong PC business. That probably will not. Well, I think looking at our China business as a whole, I think in some ways it depends on the PC market outlook. We definitely do not see significant further slowdown of PC, and therefore, I definitely do not see that there will be further significant decline in our business in China as a whole.
Sure.
So definitely-
Yes
Both PC market and smartphone market are very weak in China now.
Yes.
In the PC area, definitely our competitiveness is not a problem. We keep growing the share and improving the profitability. So that's still the very strong business.
Yes.
Definitely for smartphone market, because the market is shifting from the carrier to the open market.
Yes.
Our carrier market mix is much higher than the market average. So that hit us more than our competition. We are trying to build the new capability in the open market.
Sure
and the online model. We definitely have seen the first step of success. Our product line has worked with JD.com very well. In the first half year, we actually sold 2 million units through this channel. We also worked with Alibaba for the product line of Vibe Shot. We have seen the good results. Yesterday, we just launched ZUK, which an independent company and independent brand. Lenovo owned a majority of the share of the company. We had a very successful launch. Actually, in just 24 hours, we have gotten more than 500,000 unit pre-orders.
Sure.
That's our effort to drive the smartphone sales in China. In China, we have another opportunity, which is enterprise. Actually, our enterprise business is growing very fast and it's very strong business, actually. Lenovo ThinkServer business grew by 56% year-on-year last quarter in China. Our overall enterprise business grew 15%, 16%. That's a very encouraging business. We actually became the number 1 in the server area in China. China is still Lenovo's home base. We will make more effort to ensure we can grow in that market. Any additional comments from Gianfranco?
No, not really, Yuanqing. I think as you said, on PC, we are still gaining share and we will continue to gain share. PC is very solid. We see great opportunity on server, and we are taking also a lot of action in order to be even more competitive on the server business. Particularly on hyperscale and some other segments that are growing very fast in China. I think most of the things are coming, or let's say the slowdown is mainly coming from smartphone and from market condition that we see in China compared to six months ago.
Okay, great. That's very clear. Yeah, thank you, Yuanqing, Wai Ming. And thank you, Gianfranco. Thank you.
Thank you, Kirk. Next question, please.
Thank you. The next question comes from Arthur Xie from UBS. Please go ahead.
Yes, hi. Thanks for taking my questions. I think, in terms of the mobility business, which has the largest loss among the different business groups, could you lay out the plan to turn around in addition to this restructuring? I am actually kind of confused with this introduction of a new brand, ZUK, because you now have not just Lenovo, you have Motorola, and then you have a new brand. I think apparently with a new brand, you need to make more investments to build that brand. How are you going to really integrate the resources and try to bring down the cost? So really, what is the plan to turn around the mobility business, if you can share? Thank you.
Definitely. We are very confident. After this realignment action, we will turn around not just the Motorola business, but the entire mobile business in 2 to 3 quarters. As we committed when we closed the deal with Motorola. Actually, last quarter, we faced challenges in Latin America, particularly Latin America. Because of the macro economy was not that strong and the currency was very weak. The Motorola's business, Latin America accounts for 6% of volume. That definitely significantly hit the performance, particularly profit. Meanwhile, another issue. It is Motorola's product life cycle is too long. By the end of the life cycle, actually the product is not competitive, particularly for Moto G, Moto X.
Definitely, after this realignment, we will improve our product development cycle, to ensure in every period our product will be competitive. The third one definitely is our cost structure. It is way too high. Motorola business actually has a pretty good gross margin, but their E/R ratio is also very high. We think after this realignment we can save $850 million on a yearly basis. That can definitely help us to improve the profitability. We still believe we have the good chance to turn around this thing in 2 to 3 quarters. But definitely, because we will realign the majority of elements of the Motorola with the legacy Lenovo business. You can check our overall mobile business in the next couple of quarters.
Regarding of the ZUK, we try to use the different way to attack the China online market, and definitely open market. We try to use the complete internet model to do that. Actually, they pay more attention to a software, to the applications, to the user experience. Also, they are a startup company. They try to use the capital market to fund their business in the future. That will be additional business. It is not the Lenovo traditional business, or cloud area. Also, they were only focusing in China.
Got it. Thank you. Second question is on the PC business. Actually, the premium growth started to decline before last quarter. I think, actually, it was two, three quarters ago, the premium growth already started to show some narrowing. Could you let us know what is really behind this narrowing premium growth, and how do you plan to regain the premium growth to the industry? Thank you.
Gianfranco.
You are talking about premium growth on PC?
Yeah, to the industry.
Yeah. Okay. I think we have, let's say, the slowdown is mainly coming from some geographical area. I would say it is mainly coming from EMEA, where we have seen the market slowing down by 20% last quarter. We still had some good premium, but the situation in EMEA is probably a little bit worse than expected on some channel inventory. Not us, but mainly from competition. Very weak situation in Russia and in East overall. You see ruble is still deteriorating in the last couple of days, from 50 something to 63. So the situation is not going to improve. These were the area where we were particularly strong. We are taking action because we are taking action on the other side, we start to see a very good momentum in U.S., where we have gained more than one point share.
I think we will continue to gain share this quarter as well. We are also taking action in some other area. I think this quarter we will come back with a good premium to market, better than last quarter. But I think in Q1, we've also been very, very cautious in terms of inventory due the transition to Windows 10. So we didn't push too much in terms of loading the channel on the inventory side. So our overall situation on inventory is probably better than competition today. We also have been very, very careful on managing, or let's say, balancing between share growth and profitability, because we are still running with over 5% profitability. I would assume we didn't see yet the competition result, but I would assume it's by far the best in the industry today.
Thank you, Gianfranco.
Operator, next question, please.
Thank you. The next question comes from the line of Gokul Hariharan from JP Morgan. Please go ahead.
Yeah. Hi. Thanks for taking my questions. My first question is on the restructuring side. Could we talk a little bit about the restructuring details? Are these mostly cash expenses? Secondly, where are most of the headcount reductions coming? Is it coming mainly in the mobile business, or are we seeing some cuts in IBM as well as the PC side as well? That's my first question. Thanks.
Thank you. I think why we do this restructuring. There are two reasons. The first is because the PC market is declining significantly. Although our PC business is still very strong, it's still profitable. But we think we should do the proactive reaction to the market. We must cut the fixed expense so that we can be more competitive in the market. We believe some players will quit the industry. We definitely should leverage our advantage, our strengths, to get more market share in that market. That's the first part of the restructure. It will be related to our PC group and our corporate headquarters function. The second part is related to our newly acquired businesses, Motorola and System x, particularly for Motorola. This business, firstly, is facing challenging in Latin America, as I just said.
Last quarter, because of the Latin American macroeconomy is very weak and the currency is weak as well. That significantly impacted the demand in the market as well as the profitability. Because more than 50% of the Motorola volume come from that area, that hit the Motorola business significantly. That generated more than $200 million loss in that business. Meanwhile, we think Motorola's cost structure is way too high. When the business is not growing, it becomes even more obvious. If we don't take action, we will miss our commitment to turn around the business in four to six quarters after the acquisition. That's why we do this restructure. Actually, after restructure, we can save more than $850 million U.S. yearly. That will benefit to turn around the business. We are still confident.
We can turn around that in two to three quarters after we take out the expense and the costs. For the enterprise business, although we have integrated with the Lenovo legacy business, we have saved a lot of money. More than $500 million. But given we are facing challenging U.S. and other mature markets, I think definitely we have the room to further strengthen the competitiveness in this business. These are the two reasons. We do the restructuring work. Overall, we will save $1.35 billion U.S. dollars a year. Among that, you can see the $650 million will be booked in the second half of this fiscal year. The cost will be around $600 million.
Just to add one more point, I think the $1.35 billion number, substantially all is cash.
Okay. Got it. My second question, just expanding on what the chairman mentioned about the enterprise business in China. Previously, you had alluded to potentially some partnerships or something like that. What is the timescale in which we can expect the enterprise business in China to branch out into servers and switches as well, branch out more into related areas, not just in servers, now that you are already number one in the x86 server market?
This is talking about asking a question as to when we were going to potential partnership?
Yes. What kind of nature of expansion should we expect?
But first of all, I think we are number one, but we still see a big opportunity in terms of growth despite being number one. Because I think we are number one, but we are a very strong position on rack and tower, which we see huge opportunity on hyperscale on the other side. We are starting to see some good results, but the opportunity is still bigger. The other big opportunity, in my opinion, is storage, where we are working, and we start to see also some good result. Talking about converged, or let's say integration between server storage and networking. We are working on different possibility and different solution, not only for China but even for worldwide, because we recognize this is another area where we need to be, and we need to invest for the future.
But I would say it's a little bit too early to talk about what we are going to do in the future. For sure, we are going to invest in that area, no doubt. I think we will continue to be strong on rack and tower. We will invest on hyperscale, and we will invest in converged in order to make sure that we build up a solid foundation for the future growth.
Okay, thanks.
Thanks, Gokul. Next question, please.
Thank you. The next question comes from Jenny Lai from HSBC. Please go ahead.
Hi. Thanks for taking my question. My first question is actually on your workforce reduction plan. When the acquisition of Motorola and x86 was down a year ago, we were under the impression that there's no major restructuring events going to take place. What's driving the change now? Because we always know that Motorola's business, a huge part is in Brazil. Could you?
Yeah, actually, I just talked about that. Definitely. Motorola last year momentum was very strong. Actually, they almost doubled their business over the previous year. If this momentum can continue, definitely we don't need to do that restructure. We can digest the expense. With the hypergrowth, we can reduce the ROI ratio. But things doesn't go to what we expected. As I said, because Motorola business is facing a huge challenge in Latin America because of the macroeconomy and the currency issue where accountable 50% of their business. We cannot see the hypergrowth. Actually, Motorola business top line decline in the last quarter. That's definitely the key driver for us to do this restructuring work. Actually, we think of we have a lot of room to improve the efficiency with the Motorola business.
If you can look into the details. Actually our Lenovo phone business almost has the same volume as the Motorola does. But we may spend one-fourth or one-fifth of the Motorola expense. Definitely that give us a lot of room to improve the efficiency and to improve the competitiveness in the Motorola side. But this action will not be just a headcount cut. Actually, we decided to completely realign the Motorola business with the Lenovo business, so that we can save a lot of redundancy and overlap functions or jobs. That's why we do a restructuring for the Motorola. Definitely. Another point I need to point out is actually in the past, the Motorola product life cycle is too long. So that by the end of the life cycle, the product, the competitiveness is not that strong.
That generates a lot of inventory. That is why this time we want to clean this inventory, particularly in Latin America and in North America. That will generate some one-time write-off. But definitely in the future, we will improve our product development cycle so that in every moment our product will be competitive. For those mainstream and the low-end product, you cannot last one year. Every six months, you must change the configuration, you must change the model, so that the product is still competitive. Those are the areas we want to improve. Thank you.
Got it. Thanks.
Due to time constraint, we will probably take the last question.
Thank you. We have the last question coming from the line of Thompson Wu from Credit Suisse. Please go ahead.
Hi. Yes. Good evening, Yuanqing, Wai Ming, Gianfranco, Gary. Thanks for taking my question. Obviously, I think the focus is really on your mobile business, specifically Motorola. Just two questions here. On your breakeven targets, which are now, I guess, two to three quarters from now, can you elaborate a little bit on the share momentum, the growth momentum that you expect, that you have baked in to get to this breakeven target? Or is this target purely coming from cost savings on a current scale? My other question had to do with the smartphone inventory. Did I just hear correctly that this inventory writedown is coming primarily in Brazil and North America? A follow-up there is how much of that inventory is going to work down through the September quarter?
Thank you. Let me talk about the growth issue, then Wai Ming will address the inventory issue. As I said at the beginning, definitely cut the expense is not the ultimate purpose. We still want to build a growth engine for our company. We still want to be a very strong number three in the worldwide smartphone market. We will continue our strategy. Actually, after the restructuring, Lenovo smartphone will become stronger, will become more competitive. That give us opportunity to grow. Actually, on my chart, you can see actually outside China, our growth is pretty good. It is pretty strong. With the Lenovo phone, with only Lenovo phone, we grow significantly in Middle East Africa, in Eastern Europe, and in Asia Pacific. We grow 300% in Middle East Africa. We grow 82% in Asia Pacific.
We grow 36% in Eastern Europe. Now, particularly in the largest emerging market, we have gained a very different share and ranking. Like in India, we have 6.4% share. We are number five. In Russia, we gain double-digit share, and we are number two. In Brazil, definitely Brazil is mainly Motorola product. We have 20% market share, and we are a very strong number two in that market. Definitely, we continue this strategy to grow the smartphone business worldwide, particularly outside China.
We think outside China, we have a very good chance to become a very strong number three player. Because only Apple and Samsung are strong in those markets. No very strong other multinational brands. Lenovo is more efficient. We have the global brand, we have the channels, we have the needed IP. We are ready to grow in worldwide market. That is the plan. Wai Ming you still talk about the-
Let me just make sure that I get your question right. I think of the business realignment plan, apart from the over $600 million restructuring costs, I think there is additional funding for us to clear the inventory in smartphone, in the region of around $300 million. I think the $300 million additional funding is relating to some of the inventory that we obviously built and remain in the channel and also want to clear those so that after the business realignment plan, we are in a very solid foundation, ready for the growth in the second half of the year.
Okay. Thank you. I mean, I guess I was just looking to see, on my math, $300 million in smartphone inventory write-down, maybe roughly around 3 million-4 million units. Just an idea of how much has been burned through in the September quarter.
Right.
Back to my original question, Yuanqing. I wasn't implying that mobile is not a growth area. It certainly is for Lenovo. I just wanted to get a measure on how conservative your forecast expectations were to get to that break-even point in mobile. Thank you.
I think maybe Tom, just a last comment. I think the business realignment plan, obviously, is to build a foundation for us to regain the growth. Looking at quarter one and probably really looking at the current quarter two, I think definitely our mobility business recorded a decline year-to-year. But definitely, I think the trend will reverse to a small growth in the second half of the year with a much more efficient operation so that we will drive back to where we target ourself, which is two or three quarters as from now, which is exactly the same when we make the Motorola acquisition, is to run the business as a break even to four to six quarters. Exactly the same commitment we make to the market.
Yeah.
Okay, great.
Yeah. That's definitely still the commitment.
Yes.
Actually, although we are facing challenge in China smartphone market as well Motorola business, actually at Lenovo outside China, it's very healthy. Not only we grow faster in those regions I just mentioned, Middle East, Africa, Eastern Europe, and other Asia Pacific, but they are profitable. We think we have the benchmark, so how to make this business better. That's why we take the action to do the restructure, particularly with the Motorola business. Today, the total Lenovo phone business yearly expense is just $400 million. But Motorola has $2 billion expense. This is way too high. That gave us a lot of room to cut the expense. That's why we think we can save $850 million after the restructure. That will help us to improve the competitiveness significantly in the Motorola business.
With that competitiveness, we definitely can grow even fast with the Motorola brand and the Motorola product. But definitely, in the future, we will completely integrate the Lenovo phone and the Motorola phone together. We will have a much simpler product portfolio. That will help us not just to save the money, but also to drive the growth.
Okay. Thank you.
Thank you.
Thank you.
Thank you, Thompson . Thank you, everybody, for your participation in today's call. If you have any further questions, please feel free to contact the IR team. This webcast replay and conference call replay will be available in next couple of hours. Thank you again for joining us today. Thank you.
Thank you. Ladies and gentlemen, that does conclude the conference for today. Thank you for participating. You may all-