Lenovo's profit tops estimates

Picture: Tyrone Siu

Picture: Tyrone Siu

Published May 25, 2017

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Beijing - Lenovo Group quarterly profit fell 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 percent

slide in net income to $107 million in the three months ended March. That

compares with the $97.9 million average of analysts’ estimates compiled by

Bloomberg. Revenue increased 5 percent to $9.6 billion, compared with the $9.65

billion projected.

Lenovo narrowly lost its top position in global PCs to HP. during the quarter but managed to increase market share as industry

shipments grew 0.6 percent, the first time they’ve risen since early 2012

according to IDC. Lenovo’s biggest rival posted better-than-expected

revenue growth on Wednesday as the market stabilized. 

Overall demand however remains depressed and Lenovo needs

to tap new sources of growth or turn around an under-performing Smartphone

division. It’s 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 percent in Hong Kong.

Read also:  Lenovo's revenue beats estimates

The PC maker however isn’t out of the woods with investors

till it can stop the bleeding in servers and mobile, according to Chris Yim, an

analyst at Bocom International Holdings. “Component prices are giving Lenovo

near-term pressure,” he said. “The revenue was OK, but operating expenses are

still high.”

Lenovo warned Thursday that 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 Electronics. And Huawei Technologies. It’s now streamlining its product

line and will focus on a narrower selection of devices each year.

The company said it commanded a record 37.1 percent share of

its home PC market, which accounted for just over a quarter of its overall

revenue. Yang has emphasized the importance of China in recent speeches, promising

a clearer strategy for its biggest market. The company 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 Officer Yang

Yuanqing.

Lenovo also intends to move its Smartphone and datacentre

businesses out of the red, though it said transforming its server division will

take time. The mobile business group, which encompasses both Motorola and

Lenovo phones, posted near-20 percent growth in revenue in the quarter, and

expanded shipments by 17.4 percent to 11.3 million units outside of China. Datacentre

revenue fell 13.7 percent to $850 million.

“Any sign of stabilization of operating performance of

mobile business group should build market confidence in Lenovo’s capability to

achieve a break-even in the second half of fiscal year 2018,”  Mark Po, a

China Galaxy International analyst, wrote in a memo ahead of the earnings

release.

BLOOMBERG

 

 

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