Lenovo numbers fail to win over sceptics

Listen to this article

00:00
00:00

Lenovo, China’s largest personal computer maker, on Tuesday said it had raised both global PC shipments and market share since its acquisition of IBM’s PC unit for US$1.75bn in December.

However, the shares fell 7.2 per cent in Hong Kong in their biggest drop in just under a year after the company reported weaker-than-expected quarterly results and falling margins.

“All of the rumours [that we would] lose customers were frankly untrue,” said Steve Ward, chief executive. He said the company had won US government clients including the army and air force as well as the Food and Drug Administration.

Since Lenovo revealed plans to buy IBM’s struggling PC unit operation last year, investors have been sceptical about the deal because of concerns about Lenovo’s ability to turn the US business round and the danger that it might lose customers to international rivals.

However, their scepticism has eased since the Chinese group announced a set of forecast-beating results three months ago

Lenovo, the world’s third-largest PC maker after Dell and Hewlett-Packard, said on Tuesday it had shipped 4m PCs in the three months to end-September, compared with 3.5m in the previous quarter. Its global market share has risen slightly to 8 per cent.

“We have shipped more machines in the last three months than any time in the history, either independent or combined, of these two companies,” said Mr Ward.

However, the upbeat note was overshadowed by the company’s results for its second quarter to end-September as its performance, which included a full three-months contribution from IBM for the first time, came in below some analysts’ expectations.

Net profit rose 22 per cent to HK$354m (US$46m), against a consensus forecast of HK$433m. Turnover jumped four times to HK$28.5bn, including IBM revenues. Gross profit margin fell from 15.33 per cent three months ago to 14 per cent this quarter, while the net margin fell from 1.82 per cent to 1.2 per cent.

Lenovo’s shares, which have risen 51.6 per cent this year, fell 7.2 per cent to HK$3.525 on Tuesday.

“We are very happy with our results. I think some investors have been expecting too much from us,” said Yang Yuanqing, Lenovo chairman.

Lenovo’s results came as rival Dell warned that its revenues and earnings in the latest quarter would fall short of Wall Street forecasts, blaming the poor performance of its US consumer operation and difficult market conditions in the UK.

Mary Ma, Lenovo’s chief financial officer, said the global PC market was still growing and the company continued to see strong opportunities in the US.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.