Lenovo sells realty as smartphone sales slide

Lenovo Group Ltd will pick up about HK$1.7 billion (Dh804 million $219 million) from selling out of a developer of property and parking lots in central China, striking the latest real estate deal to shore up earnings battered by shrinking smartphone sales.

The world’s largest PC maker struck an agreement to sell a 49 per cent stake in the joint venture to a unit of Sunac China Holdings Ltd, the company that’s investing $2.2 billion in another struggling Chinese tech company called LeEco.

As part of the deal, Lenovo also gets its hands on 264 million yuan ($38 million) of the venture’s undistributed profits.

Lenovo’s pretax gain was calculated from a sale price of 1.6 billion yuan, net of transaction and other costs. Shares in the company rose as much as 1.7 per cent to HK$4.75 in Hong Kong.

Once one of China’s largest technology companies, Lenovo’s mobile-phone business is shrinking while personal-computer division manages only anaemic growth in the face of brutal competition.

Its profit plummeted more than two thirds in the December quarter, missing analysts’ projections, after HP Inc threatened its position in North America.

Smartphone sales declined by almost a quarter globally as Lenovo bled market share to rivals such as Huawei Technologies Co.

The Chinese PC maker has resorted to real estate deals to buttress its working capital, including the sale of a research building in Beijing.

It booked a $206 million gain from property sales in the September quarter, on top of disposals of what it called non-core assets in the previous three months.