Lenovo profits plummet despite PC improvements

16 Feb 2017

Lenovo. Image: nattul/Shutterstock

Lenovo’s Q3 financials make for grim reading as the Chinese tech giant is shedding profit at an alarming rate.

Lenovo, the market leader in PC manufacturing, is in trouble. Profits of $98m for Q3 are down 67pc on the same period last year, with everything from supply chain issues and global economics blamed on the worrying trend.

More likely, though, is consumer sentiment – it’s all about mobile now.

Mobile home

There’s a pretty good chance that, unless you’re at your work computer right now, you’re reading this on a mobile device.

Many could argue that this trend led to Lenovo profits dropping from $300m in Q3 2015, to $98m in the same period in 2016.

Analysts were expecting in excess of $150m.

Gartner and IDC’s most recent data on PC shipments highlight the constraints that operators are working within, with eight consecutive quarters of decline.

In the latest figures, Lenovo surprisingly saw its core PC business return a 2pc rise in revenues, the first upswing in seven quarters. Shipments also rose 2pc to 15.7m units.

But there is strife in the PC market.

Lenovo knows this, which is why it spent nearly $3bn buying Motorola Mobility from Google in 2014 – though the latter retained a significant patent portfolio.

Last month, Lenovo CEO Yang Yuanqing revealed that turning Motorola around was a harder task than they initially thought.

“We underestimated the differences of culture and business model,” said Yang to the The Wall Street Journal. The low-end smartphone market in China was saturated, the high-end was dominated by the likes of Apple, so Motorola had nowhere to go.

For the latest results, shipments in its mobile phone unit fell 26pc.

Lenovo. Image: nattul/Shutterstock

Gordon Hunt was a journalist with Silicon Republic