Lenovo profits improve on cost cuts, mobile breaks even

Lenovo reported improved profits in its fiscal third quarter to December following cost cuts, while revenues were still lower on the weak PC market. Revenues fell 8 percent year-on-year to USD 12.91 billion and were down 3 percent after excluding exchange rate effects. Revenue from the PC business dropped 12 percent year-on-year to USD 8.03 billion, and mobile revenues were down 4 percent to USD 3.25 billion, while the enterprise business grew by 8 percent to USD 1.31 billion. 
The gross margin dipped to 14.6 percent from 14.9 a year ago. Operating profit still rose to USD 379 million from USD 325 million a year earlier, helped by the restructuring which brought the mobile business to breakeven. Net profit increased to USD 300 million from USD 253 million. Lenovo said it was on track with its cost-cutting plans and expects to realise total savings of USD 650 million in the second half of this fiscal year and about USD 1.35 billion on an annual basis.

Lenovo said it still managed to outperform the broader market in the December quarter. Its global PC unit shipments declined 4 percent year-on-year to 15.4 million, against a market decline of 11 percent. The drop was mainly in the consumer market, with 8 percent lower PC shipments, compared to a 1 percent fall in the commercial segment. 

The group’s worldwide smartphone shipments declined 18 percent year-on-year, but were up 7 percent quarter-by-quarter to 20.2 million. Tablet shipments decreased 14 percent year-on-year to 3.2 million. Nevertheless Lenovo still showed annual revenue growth in mobile excluding currency effects of 5 percent, helped by its expansion outside China. Excluding one-time charges, the mobile business was breakeven in the period, and after charges, recorded an operating loss of USD 30 million.