Lenovo eases profit decline

Lenovo’s quarterly profit has fallen less than expected after the global personal computer market eked out growth for the first time since 2012.

The world’s second-largest PC maker reported a 41% slide in net income to $107m in the three months to the end of March. Market consensus had forecast income of $97.9m. Revenue rose 5% to $9.6bn, compared with the $9.65bn projected.

Lenovo narrowly lost its top position in global PCs to Hewlett-Packard during the quarter but managed to increase market share as industry shipments increased 0.6% — the first time they’ve risen since early 2012.

Lenovo’s biggest rival posted better-than-expected revenue growth on Wednesday as the market stabilised.

However, overall demand is depressed and Lenovo needs to tap new sources of growth or turn around an underperforming smartphone division.

It has re-enlisted the executive who steered the acquisition of Motorola to run its Chinese PC arm, shaking up its senior ranks to breathe new life into a stagnating business. Shares of Lenovo rose 3.7% on the back of its announcement.

However, the PC maker is not out of the woods with investors until it can stop the bleeding in servers and mobile, according to Chris Yim, an analyst at Bocom International Holdings.

Lenovo warned the supply of PC components will remain tight for the industry as a whole, potentially weighing on margins. In response, it plans to focus on faster-growing markets while continuing to build branding in smartphones, an area in which it continues to lag frontrunners like Samsung and HTC.

The company said that it commanded a record 37.1% share of its home PC market, which accounted for just over a quarter of its overall revenue.

The company’s head has emphasised the importance of China in recent speeches, promising a clearer strategy for its biggest market. Lenovo is also embracing a multi-year plan to build new businesses in cloud and data-centres while maintaining its edge in PCs.

It announced a leadership shuffle last week, bringing back Liu Jun — who left in 2015 shortly after the company took over Motorola — to oversee a newly-created local PC and smart devices division. He replaces Chen Xudong, a former rising star and lieutenant of chief executive Yang Yuanqing.

Lenovo also intends to move its smartphone and data-centre businesses out of the red. The mobile business group, which encompasses Motorola and Lenovo phones, posted near-20% growth in revenue in the quarter, and expanded shipments by 17.4% to 11.3m units outside of China. Data-centre revenue fell 13.7% to $850m.

Bloomberg


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