Lenovo make profit despite loss in PC sales

Lenovo, China’s Lenovo Group Ltd , the world’s largest personal computer (PC) maker, have said that 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 and new competitors entered the sector. The company blamed the declines on transition in its smartphone and data centre businesses, as well as on a difficult macro environment and component supply constraints.

Once the world’s largest PC manufacturer by sales, Lenovo reported overall revenue for the 12 months to March 31 fell 4 per cent to $43bn, below analysts’ estimates compiled of $43.97bn. The drop came as PC shipments dipped and a rise in memory chip prices ate into the group’s margins.

Net profit rose to $535m, bouncing back from a $145m loss the previous year but below estimates of $786.89m.

In the first quarter of this year Lenovo was overtaken in global PC sales by Hewlett-Packard for the first time in four years, making HP the world’s top PC maker by shipments. Lenovo this month announced a plan to restructure and focus on making products for its domestic market following two years of disappointing performance. Its profits fell 67 per cent in the final quarter of 2016. The company said it retained the rank of number one player in the PC market for the fiscal year with a market share of 21.4 per cent.

However, Lenovo still outperformed the overall PC market which has shrunk for two consecutive years in the face of waning demand as consumers increasingly switch to mobile and tablet devices. The company’s PC unit shipments fell 1 per cent to 55.7m during the year, compared with a 3 per cent market decline in shipments overall.

Despite its $2.9bn acquisition of Motorola Mobility in 2014, Lenovo continues to trail behind Vivo, Oppo and Huawei in sales. Lenovo’s worldwide smartphone shipments fell 22 per cent year on year, giving it a 3.5 per cent share of the global smartphone market.

The company said its data centre business had stabilized in the second half of the year and reported an 11 per cent fall in revenue compared with the previous period the first half of the year to $4.07bn. Created in April last year, Lenovo’s data centre has struggled to compete against more established companies in the industry abroad, such as Cisco and Oracle.

Yet the PC market still remains a hot target for the world’s biggest hardware companies. Earlier this month, Chinese telecoms company Huawei launched its global expansion into PCs, introducing three models of premium-priced PCs that are intended to compete directly with those of Lenovo, Dell and HP.