China’s Lenovo Group reported on Thursday that revenue fell more than expected in the April-June quarter, hit by a prolonged slump in global demand for personal computers.

The world’s largest PC maker has posted four consecutive quarters of declining sales after Lenovo reported a 14% drop in annual profit through March, its first annual decline since 2019.

Revenue fell to $12.9 billion (Rs 1,072 billion) in the April-June quarter, missing the $13.84 billion (Rs 115,100 crore) average estimate of seven analysts polled by Refinitiv.

Lenovo shares fell 6 percent in Hong Kong after the earnings report, compared with a 0.72 percent drop in the benchmark index.

The COVID-19 pandemic has given a big boost to electronics sales as consumers and companies stock up or upgrade to accommodate the shift to remote work. Revenues began to shrink last year, however, as demand began to fall, dragged down by rising interest rates and soaring inflation.

The pace of the recovery remains weak and many retailers still have unsold inventory, forcing PC makers and their suppliers, including chipmakers, to adjust output and prices.

“The group’s PC business is stabilizing and is well positioned for a year-on-year recovery in the second half of 2023,” Lenovo said in a statement.

According to market research firm Canalys, global PC shipments fell by 12% in the second quarter of 2023, a big improvement from the more than 30% decline in the previous two quarters.

Lenovo has been expanding non-PC businesses such as servers and information technology (IT) services to improve profit margins, but the devices business, which includes PCs, smartphones and tablets, still accounts for nearly four-fifths of group revenue.

Shareholders’ net profit fell 66% to $177 million (Rs 15 billion), compared with analysts’ forecast of $212.49 million (Rs 18 billion).

© Thomson Reuters 2023

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