LENOVO WARNS OF MARGIN PRESSURE
PC maker posts first quarterly loss in almost 2 years
CHINESE personal computer (PC) maker Lenovo Group Ltd warned of higher costs and margin pressure due to shortages of components like memory chips, as it posted its first quarterly loss in almost two years yesterday.
Lenovo, which gave up its title as the world’s largest PC maker to HP Inc in the quarter through June, lost US$72 million (RM309.6 million), compared with a profit of US$173 million for the same period last year.
It was the company’s first quarterly loss since September 2015 and lagged analysts’ average forecast of a US$5.29 million profit.
The outlook for the rest of the year was challenging as component shortages would dive costs higher, possibly forcing the company to raise its selling price to protect margins, said executives.
“Most of the component cost is stabilising except memory... and the price is still going up,” said Lenovo chief operating officer Gianfranco Lanci.
Memory prices rises would continue “at least until the end of the year”, albeit at a slower rate than the past two quarters, he said, a product of exploding global demand for semiconductors.
Auto industry demand was also pushing up the price of batteries, he said.
While PC makers around the world are struggling as consumers switch to mobile devices, Lenovo’s core PC business is declining more rapidly than many of its competitors’.
Lenovo posted a six per cent decline in PC shipments in the quarter, compared with a three per cent fall globally. Its PC revenue was flat at US$7 billion.
“We will turn around our mobile business in the second half of the financial year 2018, I think Lenovo is entering a new phase of growth,” said chairman and chief executive Yang Yuanqing. Reuters