Lenovo Reports Profit in Q3 Despite Revenue Slump
Lenovo Group posted a 19 percent growth in profit amid lower revenue gains in its third fiscal quarter, the company said on Wednesday. Lenovo is relying on cutting $1.35 billion from annual costs and eliminating 3,200 jobs to shield its earnings from intensifying smartphone competition and a shrinking market for PCs.
The world’s largest PC maker said revenue dropped 8 percent in the three months ended December, even as broadening cost cuts delivered a surprise rise in net income.
The company said its net income in the quarter stood at $300 million. However, Lenovo is still facing strong headwinds in various businesses.
Slow smartphone demand in the Chinese smartphone market resulted in a decline in smartphone sales by 18.1 percent year-on-year in the past quarter, with 20.2 million units sold. Lenovo saw a shipment growth in emerging markets such as India and Indonesia. About 83 percent of its smartphones were sold outside China in its third fiscal quarter, compared to 75 percent in the second fiscal quarter, according to Lenovo.
Chief Executive Officer Yang Yuanqing is trying to grab greater market share in the U.S. and Europe this year, pivoting away from intensifying competition back home. The smartphone division should stay profitable in fiscal 2017 after the summer U.S. launch of its "Tango" augmented-reality phone and a lower-cost structure help it gain market share globally, Yang told reporters on a conference call.
In addition, the sluggish worldwide PC market dragged down Lenovo's quarterly revenue by 8 percent year-on-year, the company said.
Lenovo is also banking on global demand for the servers that underpin cloud computing services to prop up its enterprise division.
The enterprise division that sells servers, storage and software was the only major business unit to record top-line growth, of 8 percent in the quarter.