China’s Lenovo reports lowest revenue growth in eight quarters

The Lenovo logo is seen in this illustration photo January 22, 2018. REUTERS/Thomas White/Illustration

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HONG KONG, Aug 10 (Reuters) – Lenovo Group ( 0992.HK ), the world’s biggest maker of personal computers, reported flat revenue for the April-June quarter as many Chinese cities were hit by Covid-19 lockdowns, marking its most muted result in eight quarters.

Total revenue in the period was $16.96 billion, up 0.2% from the same quarter a year ago, though that was in line with an average Refinitiv estimate of $16.87 billion taken from seven analysts. It was the smallest quarter-on-quarter increase since the period ending in March 2020.

However, Lenovo has made great strides in expanding into other higher-margin businesses, such as server operations, information technology services and mobile devices, with Lenovo’s non-PC business now accounting for 37% of the company’s revenue. For the quarter, net income attributable to shareholders rose 11% to $516 million.

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Yang Yuanqing, Lenovo’s chairman and CEO, said the company is “diversifying from a pure PC business to a company that offers a wide range of intelligent products and solutions.”

Shutdowns in China during the quarter dealt a blow to the PC supply chain, with major laptop manufacturing partners including Quanta ( 2382.TW ), Compal ( 2324.TW ) and Wistron ( 3231.TW ) suffering significant production disruptions, according to a report by the research firm Counterpoint.

It also coincided with the global PC industry emerging from the pandemic sales boom and the war in Ukraine, prompting several companies from chip makers to electronics makers such as Intel ( INTC.O ) and Samsung ( 005930.KS ) to warn of a sharp decline in demand. read more

Global shipments fell 11.1% in the final quarter from a year earlier, the biggest year-over-year decline since the second quarter of 2013, according to Counterpoint.

Counterpoint said Lenovo’s total PC shipments fell 12.7% to 17.4 million units, mainly due to weak consumer demand. However, Lenovo maintained its leadership in the global PC market with a share of 24.4%.

Yang said he expects this year’s global PC shipments to be between 300 million units and 310 million units. That would be a drop of almost 10% from the figure of 341 million units shipped last year reported by data firm Canalys.

But Yang said supply chain shortages, which plagued many hardware makers earlier this year, have improved.

“In some areas, we still face a shortage, particularly in the data center industry,” he said, “But overall, I don’t see significant challenges in the second half of this year.”

He also added that Lenovo has seen some price increases in the semiconductor industry, but that the company will remain flexible in dealing with price fluctuations around components.

Lenovo declined to comment on sales in Russia and the impact the war in Ukraine has had on business during the quarter.

Chinese media reported last month that Lenovo has listed job openings to hire autonomous driving engineers. Yang declined to comment on the company’s foray into the mobility industry.

Hong Kong-listed Lenovo shares fell 0.3% to HK$7.03 ($0.8956), while the broader Hang Seng was down 1.9%.

($1 = 7.8496 Hong Kong dollars)

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Reporting by Josh Ye; Editing by Tom Hogue, Edwina Gibbs and Christian Schmollinger

Our standards: Thomson Reuters Trust Principles.

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