Lenovo moved to a net loss of USD 72 million in its fiscal first quarter to June, versus a profit of USD 173 million a year ago, after a rise in costs and flat sales in the period. Revenue of USD 10.012 billion was little changed compared to USD 10.056 billion a year earlier, and the operating result was a loss of USD 6 million versus a profit of USD 245 million a year ago.
Lenovo blamed the results on difficult market conditions, including higher components costs and supply constraints. Its mains PC business posted flat sales, as the company worked on profitability over volume, while mobile revenues were up 2 percent, amid growth outside China, but the activities remained in the red. The data centre business continued to struggle, with revenue down 11 percent to USD 971 million and an operating loss of USD 114 million.
Its mains PC business posted flat sales of USD 7.005 billion, and pretax profit down 21 percent to USD 291 million. The company shipped 12.4 million PCs in the quarter, down 6 percent year-on-year compared to a market decline of 3 percent. Lenovo said higher average selling prices helped make up for the lower volume, while its market share dropped by 0.6 percentage points year-on-year to 20.4 percent. Tablet shipments totaled 2.1 million.
In the mobile business, Lenovo said sales were starting to pick up outside China, with total revenues up 2 percent to USD 1.746 billion. Total shipments were up 1 percent from a year ago, in line or slightly better than the market, with especially strong growth for Lenovo in Latin America (+56%) and Western Europe (+137%). In China, revenue and shipments were down again. The higher component costs and increased sales and marketing led to a pretax operating loss of USD 129 million, but Lenovo said the margin improved 2.2 percent points from a year ago.
Lenovo said it expects the cost pressure to continue in the short term, due to component constraints and spending on mobile marketing. The company said it will continue to focus on striking the right balance between volume and profits and underlined more positive momentum at its server business since the appointment of new management at the end of last year.
