Daily Management Review

Lenovo receives a net loss for the first time in 6 quarters


08/18/2017


The Chinese Lenovo Group, one of the world's largest personal computer manufacturers, recorded a quarterly loss for the first time in six quarters amid continued price increases for memory chips.



Kārlis Dambrāns
Kārlis Dambrāns
The net loss of Lenovo Group in the first quarter (April-June) was $ 72 million compared to a net profit of $ 173 million for the same period last year.

Lenovo's quarterly revenue fell slightly: to $ 10.01 billion from $ 10.06 billion a year earlier. The company’s Chief Executive Officer Yang Yuanqing said that the continued rise in prices for memory chips is negatively affecting the profitability of all the main lines of Lenovo’s business.

"We've never seen such a situation in the past," Lenovo's CEO said. "The prices of many components, such as memory chips, have been growing for a couple of consecutive quarters or even more than a year, which has a serious impact on the industry's profitability."

The growth in demand for memory chips has provoked a shortage of these chips and an increase in prices for them for manufacturers of electronic devices. Yang Yuanqing noted that it is difficult for companies to shift costs associated with the increase in component prices to buyers, since Lenovo and many of its large customers are tied by long-term contracts.

Among Lenovo’s main problems, announced earlier this year about restructuring, is a steady decline in sales of PCs, which are the largest source of revenue and revenue for the company, as well as a weakening of demand for mobile phones.

This year, Lenovo lost the lead in the sales of PCs of American HP Inc., while in the segment of mobile devices it seriously lags behind Apple Inc. And Samsung, having a market share of only about 3.2%. The revenue of the division of the company that produces PCs, tablets and other "smart" devices, in the past quarter was $ 7 billion, remaining at the level of the same period a year earlier.

In April-June, Lenovo sold 12.4 million PCs. According to research company IDC, Lenovo accounted for 19.9% of world shipments of personal computers in the II quarter of 2017 (20.8% a year earlier).

Lenovo’s shares on the auction in Hong Kong on Friday fell by 3.6%.

source: bloomberg.com






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