Lenovo reported a return to profit in its fiscal first quarter to June, driven by revenue growth and cost savings from the merger of its PC and mobile phone activities. Revenues rose 19 percent year-on-year to 11.91 billion, the gross margin increased to 13.7 percent from 13.6, and the net result improved to a profit of USD 85 million from a loss of USD 54 million a year ago.
Lenovo said its restructuring efforts were paying off. The Intelligent Devices Group, created from the merger of PCs and phones, grew sales 14 percent to USD 9.95 billion, and the Data Center Group jumped by 68 percent to revenues of USD 1.63 billion, driven by the HPC segment. Within IDG, the PC unit grew revenues 19 percent year-on-year to USD 8.31 billion, while revenue from the mobile business was still down 6 percent to USD 1.65 billion.
Mobile still in the red
The drop in mobile revenues was due to a reduced geographic focus to profitable markets, mainly in North and South America, as well as a streamlining of the portfolio to more "mainstream" models. Shipments were still down 8 percent year-on-year but grew by 12 percent compared to Q1. The continued focus on cost savings led to a reduction in the pretax operating loss in mobile to USD 65 million from USD 129 million a year ago.
Pretax profit at the PC unit jumped 43 percent year-on-year to USD 418 million, thanks to an improved profit mix with a higher share of sales in the commercial segment. Lenovo also focused more on the premium segment in the consumer market and benefited from the takeover of Fujitsu's PC business in the quarter.
