Lenovo posts US$714m loss in second quarter, beating expectations

Chinese technology giant has suffered from a decline in global demand for PCs

PUBLISHED : Thursday, 12 November, 2015, 6:36pm
UPDATED : Thursday, 12 November, 2015, 6:36pm

Chinese technology giant Lenovo recorded a loss for the second quarter of its fiscal year following a cost restructuring plan, despite stronger sales in its mobile business.

However, the loss reported by the world’s biggest personal computer maker was narrower than analysts’ forecasts.

“With strong execution, Lenovo acted swiftly and decisively to address challenges, while still delivering better-than-previous-quarter results,” Lenovo chairman Yang Yuanqing said in a statement on Thursday.

Lenovo had said that it would seek to slash costs by US$1.35 billion annually and cut 3,200 staff from its non-manufacturing workforce – around 5 per cent of its worldwide headcount, when it announced its first-quarter results in August.

“Going forward these actions are intended to drive meaningful run-rate cost savings of about US$650 million in the second half of this year and about US$1.35 billion on an annual basis,” it said on Thursday.

Lenovo posted a net loss of US$714 million for the second quarter ending September 30, compared with a profit of US$262 million in the same period last year.

Analysts had expected the firm to report a US$803 million loss, according to a poll by Bloomberg.

Revenue increased 16 per cent to US$12.15 billion, while the company also saw a pre-tax loss of US$842 million.

Lenovo has suffered from a decline in global demand for PCs, which account for around a third of its revenue despite its efforts to diversify into other sectors, including the smartphone market.

Sales in its PC business were down 17 per cent year on year at US$8.1 billion, shipping 15 million PCs during the second quarter.

Its quarterly mobile business sales, which include Motorola, was up 104 per cent year on year at US$2.7 billion.

“In mobile, our strategy to shift our growth focus to outside of China continued to pay off, and we gained share and improved margin,” Yang said.

The technology firm said 18.8 million mobile units were sold, up 11 per cent compared with the same period last year, led by growth outside China.

Lenovo bought Motorola from Google for US$2.9 billion in October last year, soon after its purchase of IBM’s low-end server business as part of its strategy of broadening beyond PCs.