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  1. #1
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    [EN] Lenovo Q3 profit falls 67% as mobile, data center revenue tumble

    Charles Arthur ‏@charlesarthur 7 hours ago

    Mobile revenue collapsed. Tell me again how buying Motorola was going to pave its way to success in smartphones worldwide.

    Lenovo Reports Sharp Drop in Earnings

    February 16, 2017

    Lenovo Group Ltd.’s mobile-phone business continues to shrink, while its personal-computer division managed anaemic growth in the face of brutal holiday-season competition.

    The world’s largest PC maker’s profit plummeted more than two thirds in the December quarter, missing analysts’ projections after HP Inc. threatened its position in North America. Smartphone sales declined almost a quarter globally as Lenovo bled market share to rivals such as Huawei Technologies Co. -- both at home and abroad.

    Lenovo remains the leader in a PC market struggling through a prolonged downturn as people opt for smartphones to handle everyday tasks. But it barely maintained pole position over HP as its chief rival widened its share in North America, according to research firm IDC. In mobile, Lenovo is pinning its hopes on premium phones, such as the one with augmented reality capabilities, to breathe life into the loss-making division. Yet it’s still ceding ground to rivals that’re winning users over with aggressive sales tactics.

    Shares of Lenovo had fallen 6.7 percent by 3:27 p.m. in Hong Kong, on track for their biggest fall since May.

    A rise in memory chip prices pressured margins in Lenovo’s main business. While the industry isn’t yet out of the woods, it’s showing signs of stabilization, executives said on a post-earnings conference call. Worldwide PC shipments fell 1.5 percent in the fourth quarter, a slimmer decline than the previous period’s 4 percent, according to IDC.

    “The component price remains high, which could be a headwind for them,” said Chris Yim, an analyst with BOCOM International. But “their net income should get better. The global PC market is stabilizing, that’s a good sign for them.”

    Net income fell 67 percent to $98 million in the quarter that ended in December, well below the the $145.9 million average of analysts’ estimates compiled by Bloomberg. Revenue fell 6 percent to $12.2 billion, compared with estimates for $11.7 billion. The Chinese company warned Thursday its market will remain challenging because of macroeconomic uncertainty and rising component prices.

    Lenovo is cutting jobs, selling assets and pushing into higher-end devices to weather shrinking demand and competition. Three years after Lenovo closed its $2.9 billion acquisition of Motorola Mobility, the smartphone business remains well behind Vivo, Oppo and Huawei in terms of market share. Its mobile business turned in an operating loss of $112 million after sales slid 23 percent to $2.2 billion. Worldwide smartphone shipments dived 26 percent as its market share slipped to 3.5 percent, the company said.

    In 2016, it appointed long-time human resources director Gina Qiao to lead smartphone sales in China, the third executive in the position since the Motorola takeover. She hasn’t outlined how she intends to revive the business. Chief Executive Officer Yang Yuanqing said he remained confident the division will achieve break-even by the second half of the next fiscal year ending March 2018.

    “We’ll start from scratch to rebuild our China business,” Yang said in a telephone interview. “You probably can’t see the progress from the financial data but she’s building a stronger team and a better business model.”

    Phone shipments, including Motorolas, dived more than 30 percent in 2016, Counterpoint Research estimates. The company was ranked ninth globally during the holiday quarter, ahead of Alcatel but behind South Korea’s LG. Lenovo has said it expects the smartphone business to turn profitable this year, though a paucity of new models cast doubt on its outlook, Yim wrote in a note ahead of the earnings.

    Lenovo’s PC business -- still 70 percent of its revenue -- managed growth in the quarter, as both revenue and shipments edged 2 percent higher. The Beijing-based company is now negotiating a deal to tie up with Japan’s Fujitsu Ltd. and shore up its position, an imperative given the smartphone business it bought with Motorola remains unprofitable.

    The data center unit, built up around the 2014 acquisition of International Business Machines Corp.’s low-end server business, didn’t fare as well. Revenue there slid 20 percent to $1.1 billion.

    “Lenovo is as keen as Fujitsu to close a deal soon, so that it can comfortably retain its No. 1 PC crown,” Ken Hui, an analyst at Huatai Financial Holdings, wrote in a note ahead of the earnings release.

    — With assistance by Yuan Gao

  2. #2
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    Lenovo blames ongoing component supply constraints for profit decline

    Chairman Yang Yuanqing says group fared well despite macro-economic uncertainties and business transition

    Bien Perez
    16 February, 2017

    Lenovo Group, the world’s largest supplier of personal computers, warned on Thursday that its industry’s component supply constraints would remain challenging for the near term, after reporting weaker-than-expected earnings for the quarter ended December 31 as its three main business lines recorded slow to no growth at all.

    The company said net profit declined by 67 per cent to U$98 million in its fiscal third quarter to December, compared with US$300 million in the same period in 2015, as sales of smartphones and data centre systems stagnated.

    Revenue declined 3 per cent to US$12.17 billion from US$12.91 billion a year earlier.

    Its net profit missed the US$145.9 million consensus estimate of analysts surveyed by Bloomberg, but revenue was ahead of their US$11.69 billion forecast.

    Shares of Lenovo tumbled 6.69 per cent to HK$4.88 at the close of trading on Thursday.

    Yang Yuanqing, Lenovo’s chairman and chief executive, said in a conference call that “component supply constraints across the industries the group operates in had impacted [its financial]performance”.

    “If we had enough supply of DRAM (dynamic random access memory) chips and camera components last quarter, we could have sold two million more smartphones,” Yang said.

    Alberto Moel, a senior analyst at Bernstein Research, said this was the first time Lenovo has seen an impact from higher component costs. “Its gross margins were compressed from higher costs for battery, displays and memory,” Moel said.

    Lenovo reverses PC shipment decline to retain No 1 spot for global sales

    Lenovo’s gross margin, which represents the selling price of goods less production or acquisition costs, reached 13.1 per cent last quarter, down from 14.6 per cent a year earlier.

    Market research service DRAMeXchange has estimated the average selling price of DRAM products for smartphones, personal computers, servers and other applications will rise by more than 30 per cent, on average, during the first three months of this year, compared with the same period a year ago, even as the supply situation remained tight.

    Gianfranco Lanci, Lenovo’s chief operating officer, said this industry-wide concern could ease up in the second half of the year.

    Yang put a positive spin on the quarterly earnings miss by pointing out that Lenovo’s personal computer business continued to grow, “despite ongoing macro-economic uncertainties”.

    The firm’s personal computer and smart devices business posted a 2 per cent year on year increase in sales during the quarter to US$8.6 billion.

    Lenovo reports quarterly profit of US$157m, sees smartphone unit on pace for turnaround in 2017

    Helped by strong growth in North America, where shipments increased by 14 per cent year on year, Lenovo sold 15.7 million personal computers worldwide during the December quarter.

    Its data centre business, which includes servers, storage, software and services, saw a 20 per cent drop in sales to US$1.1 billion. The mobile business, comprising Moto and Lenovo-branded smartphones, had a 23 per cent year on year decrease in sales to US$2.2 billion.

    Neil Shah, research director at Counterpoint, said Lenovo has done well outside its home market, which led to a global market share of 3.2 per cent last quarter. “It has gained some traction in India, with a 9 per cent share; Russia, with 7 per cent; and 5 per cent share in some Middle East markets,” Shah said.

    Yang said Lenovo remained confident of “achieving break-even and profitable growth” in both its mobile and data centre businesses.

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