Covid lockdowns and weaker demand have hit Lenovo Group, the world’s biggest maker of personal computers, which reported flat revenue for the April to June quarter – its worst result in nine quarters.
Total revenue for the group in the quarter was $16.96 billion, up by a meagre 0.2% from the same quarter a year ago, its smallest rise since March 2020 when Covid first hit the global economy.
However, Lenovo has made big strides in expanding into other higher-margin businesses such as server operation, information technology services and mobile devices.
The company’s non-PC business now accounts for 37% of the company’s revenue. For the quarter, net income attributable to shareholders rose 11% to $516 million.
Yang Yuanqing, Lenovo’s chairman and chief executive, said the company is “diversifying from a pure PC business to a company that offers a broad range of intelligent products and solutions.”
Weak Demand Sees Shipments Fall 12.7%
Lockdowns in China during the quarter dealt a blow to the PC supply chain, with major laptop manufacturing partners including Quanta, Compal and Wistron suffering significant manufacturing disruptions, according to a report by research firm Counterpoint.
It also coincided with the global PC industry coming off the pandemic-fuelled sales boom and the war in Ukraine, prompting several companies from chipmakers to electronics manufacturers such as Intel and Samsung to warn of a sharp slowdown in demand.
Global shipments fell 11% in the past quarter from a year earlier, the largest year-over-year decline since the second quarter of 2013, according to Counterpoint.
The research firm said Lenovo’s total PC shipments fell 12.7% to 17.4 million units largely due to weak consumer demand. However, Lenovo maintained its leadership in the global PC market with a 24.4% share.
Yang said 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.
Supply Shortages Easing
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 declined to comment on sales in Russia and the impact the war in Ukraine has had on its business during the quarter.
Chinese media reported last month that Lenovo has listed job posts to hire autonomous driving engineers. Yang declined to comment the company’s foray into the mobility business.
Lenovo’s shares on the Hong Kong Stock Exchange were down 0.3% at HK$7.03 ($0.8956) while the broader Hang Seng was down 1.9%.
- Reuters with additional editing by Jim Pollard