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Lenovo

Lenovo returns to profit amid lingering weakness in mobile, data-centre businesses

PUBLISHED : Thursday, 25 May, 2017, 4:03pm
UPDATED : Thursday, 25 May, 2017, 10:30pm

Lenovo Group plans to step up the transformation at its underperforming mobile and data-centre businesses after the computer giant swung back in the black in the year to March, rebounding from a loss in the same period last year.

“The group will execute its strategy diligently to drive sustainable profitable growth over time,” chairman and chief executive Yang Yuanqing said in a press conference on Thursday after the market closed.

Shares of Lenovo opened at HK$4.87 but quickly surged in the afternoon after the company reported its results for the financial year to March. They rose 3.7 per cent to close at a four-week high of HK$5.05.

The company, which has operations in more than 160 countries, posted a net profit of US$535 million, compared with a US$128 million loss the previous year.

Revenue was down 4 per cent to about US$43 billion due to lingering weakness at its mobile and data-centre businesses.

Its net profit missed the US$604 million consensus estimate from a Bloomberg survey of analysts while revenue was in line with the market estimate of US$43.1 billion.

During the year, Lenovo recorded US$555 million in gains from the disposal of non-core assets and its stake in a joint venture.

“Despite challenging market conditions, Lenovo saw revenue resume growth in the fourth quarter after five quarters of decline,” Yang said.

In the March quarter, revenue grew 4.9 per cent from a year earlier to US$9.6 billion but net profit was down 41 per cent to US$107 million.

Sales of personal computers, tablets and related smart devices in the quarter rose 4.9 per cent to US$6.7 billion as shipments advanced 1 per cent to 14.4 million units.

“While Lenovo is still gaining share in consumer personal computers, we believe it is seeing very high channel inventory, which will likely put pressure on its growth over the next one to two quarters,” Huatai Research analyst Ken Hui said.

Yang, however, said the group would look to strengthen its position in the personal computer market as the industry continued to consolidate.

He added that its mobile business would sharpen the focus on mature economies, where rival Chinese brands were less competitive.

The new president of the data-centre business, Kirk Skaugen, was now pushing forward the unit’s transformation efforts, Yang said.