Lenovo returns to profit as PC performance beats overall market

Reuters: China’s Lenovo Group Ltd, the world’s largest personal computer (PC) maker, on Thursday said it returned to profit in a year when its PC shipments fell at a slower rate than the overall market as consumer demand continued its downward trend.

Profit reached $535 million in the year to March, reversing a loss of $128 million a year prior and missing the $569 million average of 24 analyst estimates in a Thomson Reuters Poll. Revenue fell 4% to $43 billion.

The result comes as Lenovo navigates a PC market that has shrunk markedly since the advent of smartphones and tablet computers. According to researcher Gartner, global PC shipments fell for the 10th consecutive quarter in January-March, and dipped below 63 million units for the first time since 2007.

At Lenovo, annual shipments fell 1% versus a market fall of 3%, with market share rising 0.4%age point to a record 21.4%. Revenue in its PC and smart devices unit - which makes up 70% of the total - fell 2%.

The company blamed the decline in results on transitions in its smartphone and data center businesses, as well as a difficult macro environment and component supply constraints in the second half of the year.

“Despite market conditions that will remain challenging in the short term, the Group exited the year with stronger organisation allowing for sharper customer focus and more compelling product portfolio across all our business,” Chairman and Chief Executive Officer Yang Yuanqing said in a filing.

Mobile loss

PC competition took a step up this week when China’s largest mobile phone maker, Huawei Technologies Co Ltd., said it would enter the market for premium consumer models.

Lenovo also competes with Huawei in mobile, which accounts for 18% of revenue. The unit’s loss widened to $566 million from $469 million a year prior, though Lenovo said it had strong growth in Latin America and Western Europe.

The company’s smaller data center business, which includes servers and enterprise services, booked a loss of $343 million.

Yang said Lenovo’s core PC business remained solid, transformation for its mobile business was on track, and it is accelerating efforts to improve its data center business.

For the three months through March, profit fell 41% to $107 million on revenue that rose 5% to $9.58 billion.

Lenovo says will not phase out its own phone brand

Reuters: Lenovo Group chairman and chief executive Yang Yuanqing told Reuters on Thursday the company’s China business reorganisation will not affect its mobile business on the mainland.

Yang, speaking after the company reported a return to profit for the year to March, said the company will keep its Lenovo-Motorola dual-brand strategy for it mobile business despite a widening loss.

“We will never phase out Lenovo,” Yang said.