Lenovo reports quarterly profit jump, while revenue declines

Lenovo Group Ltd posted a better-than-expected quarterly profit jump on Wednesday, but also saw a major revenue slump.

Gloomy growth prospects for global personal computers and slowing Chinese smartphone sales sank the company’s stocks in Hong Kong.

The world’s largest personal computer vendor and the fourth-biggest maker of smartphones said its net profit for the quarter ended Dec 31 stood at $300 million, up 19 percent year-on-year.

But the company also reported an 8 percent yearon-year revenue decline due to sluggish demand and the depreciation of the yuan. Revenue for the October-December period was $12.9 billion, according to the company.

The Hong Kong-listed company closed at HK$6.61 ($0.85) on Wednesday, a 10.19 percent decline compared to the previous trading day.

Yang Yuanqing, chairman and CEO of Lenovo, said the global economic slowdown, yuan fluctuations and PC market decline had affected the company’s sales.

“Despite the difficulties, I’m still very pleased with our performance in the quarter. The declines were because of weakening overall demand that Lenovo was unable to control,” Yang said.

He said that the company would make breakthroughs in the commercial PC market and overseas smartphone markets in the coming quarters.

Lenovo had mixed results in its mobile unit, which includes Motorola smartphones, Lenovo-branded handsets and tablets.

The company said its mobile business was able to break even, more than a year after it purchased Motorola Mobility from Google Inc for $2.9 billion. However, total smartphone volume declined 18.1 percent year-on-year with 20.2 million units sold due to lackluster demand.

Chen Xudong, head of Lenovo’s mobile business, said Lenovo will lift its profit margin in overseas markets and seek opportunities to win a greater market share in China.

Lenovo dropped out of the competition on its home turf as local players such as Xiaomi Corp and Huawei Technologies Co Ltd leapt forward.

Research from Canalys China showed Xiaomi and Huawei account for roughly 30 percent of the Chinese smartphone market.

In addition, Lenovo saw a 12 percent sales decline in the PC market, its biggest profit source. A greater-than-expected slowdown in the PC market hurt the unit’s results.

Maciek Gornicki, IDC’s research manager of client devices overseeing Asia-Pacific markets, said low activity in consumer demand coupled with currency fluctuations had negatively affected PC shipments last year in the region, which is a key market for Lenovo.

“2016 is expected to remain difficult for the industry, as the current gloomy economic outlook, with uncertainty in financial markets affecting multiple countries, is likely weigh on IT spending in the near future,” said Gornicki.

Worldwide PC shipments totaled 71.9 million units in the fourth quarter of 2015, a year-on-year decline of 10.6 percent, IDC warned.

Industry sources have said Huawei and Xiaomi are planning to introduce laptop PCs, threatening Lenovo’s territory. Lenovo’s Yang said the company will use the enterprise and replacement markets to maintain top spot.

Lenovo had 21.4 percent of the global PC market at the end of 2015, edging out US competitors such as HewlettPackard Co and Dell Corp, said IDC.

Despite the difficulties, I’m still very pleased with our performance in the quarter.”

Yang Yuanqing, chairman and CEO, Lenovo Group Ltd