China's Lenovo Group reported its first revenue decline in 10 quarters as a pandemic-fuelled computer sales boom comes to an end, with sales especially falling in China as COVID lockdowns took a toll.
The world's largest maker of personal computers said on
Thursday that total revenue during the July-September quarter was $17.09
billion, down 4 percent from the same quarter a year ago, but coming above an
average Refinitiv estimate of $16.74 billion drawn from seven analysts. That
was the first decline since the March 2020 quarter.
Lenovo had already seen growth for its first-quarter revenue
grind to a halt, at only 0.2 percent. Together with its second-quarter result,
the company reported a 2 percent decline for its fiscal first half.
Lenovo's struggles reflect a weakening market for PCs
globally. Global PC shipments declined 15 percent year-over-year in the third
quarter, according to a report published by data firm IDC last month.
But the company continues its trajectory towards better
profit as it expands its non-PC business. Net income attributable to
shareholders for the quarter rose 6 percent to $541 million
Lenovo is hit particularly hard in China due to the
country's Covid containment measures, the company said. Revenue from China fell
12 percent from the same quarter last year.
Yang Yuanqing, Lenovo's chairman and chief executive, told
Reuters in an interview that the revenue decline in China is due to weakening
demand from commercial clients rather than consumers, unlike in many other
markets around the world where consumer demand is being dampened by rising
inflation.
"In China, consumer is better than commercial," he
said, "Actually in the rest of world, it's the reverse (where) consumer is
impacted by inflation."
But Yang said that Lenovo's factories in China have not been
impacted by the country's battle with Covid.
"Most factories are still operating very well," he
said.
The IDC report showed that Lenovo, HP, and Dell saw
year-over-year shipments fall by 16 percent, 28 percent and 21 percent,
respectively. The Chinese company maintained its leadership in the global PC
market with a 22.7 percent share. Lenovo did not give shipment numbers.
Chipmaker Qualcomm expects a slump in sales as its forecast
for holiday-quarter revenue fell about $2 billion short of Wall Street
estimates.
Lenovo has been working over the past several quarters to
improve its non-PC businesses such as smartphones, servers and information
technology services, which together now make up about 37 percent of its
revenue.
Yang said he expects Lenovo's non-PC business will account
for more than half of the company's revenue in the future.
When asked about recent US government export controls on
semiconductors to China, Yang said it will have a limited impact on Lenovo's
business.
"It will have an impact only on the high-performance
computers. But that business accounts for a very tiny portion of our total
revenue," he said.
On semiconductor supply, Yang said that the company is
seeing a normal supply of chips for PCs and smartphones but shortages persist
in its infrastructure business. © Reuters
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