Lenovo disappoints on weak US sales

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Lenovo, the world’s third largest computer maker, on Thursday reported a larger-than-expected drop in earnings for its second fiscal quarter despite a slight increase in turnover due to weak performance in the US.

For the three months to September 30, the Chinese company said net profit declined 16.6 per cent to $38m, compared with $45m a year earlier and analysts’ forecast of about $42m. Operating margin fell to 1.6 per cent from 2.9 per cent a year ago.

Lenovo last year bought IBM’s personal computer business in an attempt to expand abroad. However, the restructuring costs resulting from the acquisition have been weighing on the company’s results. Competition in the computer industry has also remained fierce.

Lenovo said PC shipments rose 25 per cent in China during the quarter, where it controls 36.5 per cent of the market. But it lost share in the US due to its limited presence in the consumer market and low brand awareness.

“The situation in America is the cause of most concern,” said Mary Ma, chief financial officer.

“We are facing significant price pressure in the market. The situation is compounded by the supply chain issue that we have addressed many times – we have created demands that we are not ready to fulfil.”

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