China's Lenovo posts slowest revenue rise in 9 quarters on PC downturn (updated)

Compal Electronics

10/08/2022 07:15

(Adds comments from CEO, CFO)
    By Josh Ye
    HONG KONG, Aug 10 (Reuters) - China's Lenovo Group  0992.HK 
recorded its smallest revenue growth in nine quarters as the
world's biggest PC maker saw sales of the devices ease after a
pandemic-fuelled boom, and it was also hit by COVID-19 lockdowns
at home.
    The results vindicate Lenovo's strategy of emphasising
development of its non-personal computer (PC) businesses such as
smartphones, servers and information technology services, which
together now make up more than a third of its sales.
    Lenovo's total revenue during the April-June quarter was
$16.96 billion, up 0.2% from the same quarter a year ago though
it was in line with an average Refinitiv estimate of $16.87
billion drawn from seven analysts. That was the smallest
increase since the March 2020 quarter.
    Net income attributable to shareholders for the quarter rose
11% to $516 million. 
    Lenovo's subdued business growth coincided with the global
PC industry cooling after a pandemic-fuelled sales surge,
prompting several companies from chipmakers to electronics
manufacturers such as Intel  INTC.O  and Samsung  005930.KS  to
warn of a sharp slowdown in demand.  urn:newsml:reuters.com:*:nL4N2Z947R urn:newsml:reuters.com:*:nL1N2Z83N6
    Global shipments fell 11.1% in the past quarter from a year
earlier, the largest year-over-year decline since the second
quarter of 2013, according to research firm Counterpoint. 
    Lenovo’s total PC shipments fell 12.7% to 17.4 million units
largely due to weak consumer demand, Counterpoint said. However,
the Chinese company maintained its leadership in the global PC
market with a 24.4% share. Lenovo itself did not give shipment
numbers.
    Moreover, lockdowns 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 manufacturing disruptions,
according to a Counterpoint report. 
    
    SUPPLY CHAIN IMPROVING
    Wai Ming Wong, chief financial officer of the company, said
in an earnings call that the company's device business saw
quarterly revenue decline 3% because of "the weak consumer PC
demand and the COVID-led supply constraints." 
    But he said that non-PC device businesses saw a 12% increase
in revenue. Revenue from smartphone sales grew over 20% compared
to the same period last year.
    Yang Yuanqing, Lenovo's chairman and chief executive, told
Reuters in an interview that he expects this year's global PC
shipments to be between 300 million units and 310 million units.
That would be a near 10% dip from the figure of 341 million
units shipped last year reported by data firm Canalys.
    But Yang said that supply-chain shortages, which plagued
many hardware manufacturers earlier this year, have improved.
    "In some areas we are still facing a shortage, particularly
in the data center business," he said, "But generally speaking,
I'm not seeing significant challenges in the second half of this
year."
    He also added that Lenovo has seen some price increases in
the semiconductor industry but the company would remain flexible
in dealing with price fluctuations around components. 
    Lenovo's shares on the Hong Kong Stock Exchange were down
0.71% while the broader Hang Seng index  .HSI  was down 2.32%.

 (Reporting by Josh Ye; Editing by Christian Schmollinger and
Muralikumar Anantharaman)
 ((Josh.Ye@thomsonreuters.com;))