China's Lenovo swings to Q2 profit on property sale

Lenovo's laptop PCs are displayed at an electronic shop in Tokyo September 5, 2012. REUTERS/Kim Kyung-Hoon/Files

HONG KONG: China's Lenovo Group Ltd, the world's largest personal computer (PC) manufacturer by shipments, said it returned to profit in its second fiscal quarter, beating analyst estimates, due primarily to gains from an asset sale. 

Growth in the consumer PC market in particular has been sluggish in recent years as tablet computers and increasingly capable smartphones become widespread. 

Lenovo is the world's largest PC vendor with a 21.3% market share, but its lead over second-ranked HP Inc has shrunk to the narrowest margin since the Chinese firm took the top position in 2013, showed data from researcher IDC. 

"In the short term, market conditions will remain challenging," chairman and chief executive Yang Yuanqing said in a filing to the Hong Kong Stock Exchange. Lenovo aims to maintain leadership in PCs through industry consolidation while building on its mobile and data centre businesses, he said. 

Profit reached US$157mil (RM657.35mil) for the three months ended Sept 30, from its worst-ever quarterly loss of US$714mil (RM2.98bil) in the same period a year earlier when Lenovo booked one-off costs to restructure and integrate the mobile business of Motorola. 

The result, helped by a property disposal gain of US$206mil (RM862.52mil), compared with a Thomson Reuters SmartEstimate of US$131mil (RM548.49mil) drawn from the estimates of 14 analysts. 

Revenue fell 8% to US$11.2bil (RM46.89bil), versus the US$11.02bil (RM46.14bil) analyst estimate. 

For the first half, net profit was US$330mil (RM1.38bil) versus a loss of US$609mil (RM2.54bil) a year earlier, while revenue fell 7% to US$21.3bil (RM89.18bil). It said revenue fell 8% in its PC and smart device business, 10% in its mobile business and 4% in its data centre. 

"The Group will develop new smart devices, powered by cloud and enriched with services," Yang said in the filing. "The Group is exploring smart home, smart office, smart healthcare and other areas and leveraging artificial intelligence ... and other new technologies." 

Lenovo said its global PC shipments declined 3% in the first half against a market decline of 4%. 

Lenovo is in talks with Japan's Fujitsu Ltd to explore strategic cooperation regarding the latter's PC business. A potential acquisition of Fujitsu's PC business could help Lenovo consolidate its footing in the global PC market and counter slower growth at home in China, its biggest market, analysts said. — Reuters

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