China’s Lenovo reported its first profit decline in nearly three years and warned of job cuts, as the world’s biggest computer maker continued to suffer from weakening demand for PCs and other smart devices.
Net profits in its December quarter fell for the first time since 2020, down 32 per cent year on year to $437mn. Revenues declined for the second quarter in a row, plunging 24 per cent to $15.3bn. The figure was well short of the $16.4bn predicted by analysts polled by Refinitiv. Lenovo shares were down more than 3 per cent in Hong Kong on the news.
“The smart devices market is in its worst period,” said Lenovo’s chief executive Yang Yuanqing on an earnings call.
The company would need to cut expenses by making workforce adjustments and recruit in businesses with high growth potential, he added.
Wong Wai Ming, chief financial officer, said operational expenses would have to be cut by about $150mn to double the company’s net margin.
Lenovo is a bellwether for an industry that has gone into decline after the boom years of the pandemic, during which there was a huge uplift in consumer electronics sales stimulated by the shift to remote working. With the major economies now suffering inflationary pressures and facing recession, global PC demand has fallen, with consumers and companies becoming more cautious in their spending.
Yang said he believed the market was also still digesting pandemic-era inventory. “We think the market demand is not as bad as many expected,” he said, predicting the PC market would resume growth from the second half of the year.
The IDC research firm had reported a 28 per cent annual fall in global PC shipments in the fourth quarter of 2022, to 67.2mn units, while its rival Gartner predicted shipments of PCs and mobile phones would continue to fall this year, although at a slower rate. PC shipments were expected to drop 6.8 per cent this year after declining 16 per cent in 2022, it said.
While Lenovo maintained its leadership over HP and Dell in its core PC market, according to IDC, research group Canalys reported that it lost its number one position to Apple in the fourth quarter if tablets were added to notebooks and desktop PCs. Lenovo shipped 17.9mn units in total then, down 32 per cent year on year.