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Poor PC Demand Hurts Lenovo's First Quarter Revenue Expectations

Poor PC Demand Hurts Lenovo's First Quarter Revenue Expectations
China's Lenovo Group, which produces personal computers, reported a worse-than-anticipated 24% decline in revenue for the April-June quarter on Thursday.
It follows Lenovo's announcement of a 14% loss in annual earnings for the year that ended in March, the company's first annual decline since 2019. This results in the largest PC manufacturer in the world seeing a sales decline for four consecutive quarters.
The quarter from April to June saw a decrease in revenue, falling to $12.9 billion from the $13.84 billion average of the seven analyst projections that Refinitiv gathered.
Following the earnings announcement, Lenovo shares in Hong Kong dropped as much as 6%, versus a 0.72% loss in the benchmark index.
Electronics sales were greatly boosted by the COVID-19 outbreak as businesses and consumers alike stocked up or upgraded to prepare for a shift to remote work. However, as demand started to decline last year as a result of rising interest rates and skyrocketing inflation, revenue started to decline.
Since many retailers still have unsold inventory, the pace of recovery is still slow, requiring PC makers and their suppliers, such as chipmakers, to change manufacturing volume and prices.
"The group’s PC business is stabilizing and well-positioned for a year-on-year recovery in the later part of 2023," Lenovo said in a statement.
According to market research company Canalys, global PC shipments declined by 12% in the second quarter of 2023, a significant improvement from a decline of more than 30% in the first two quarters.
Lenovo has been growing non-PC industries like servers and information technology (IT) services to increase profit margins, but its device division, which includes PCs, cellphones, and tablets, still accounted for close to 45% of group sales.
Analysts had predicted $212.49 million in net income attributable to shareholders, but it actually dropped 66% to $177 million.

Christopher J. Mitchell

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