Lenovo Group Ltd, China’s largest personal-computer company, had a worse-than-expected fourth-quarter loss because of costs for cutting jobs after buying IBM Corp’s PC business.
Net loss for the quarter ended March 31 was HK$903 million (US$116 million), according to figures derived from full-year results Lenovo announced yesterday. The Purchase, New York-based company had a profit of HK$166 million a year earlier. Lenovo said it had a one-time cost of HK$543 million for cutting jobs and relocating offices.
Chairman Yang Yuanqing bought IBM’s PC business in May last year for US$1.25 billion to expand overseas as competition in its home market of China rose and prices slumped.
Dell said last week it is prepared to cut prices further to win Asia market share and challenge Lenovo’s dominance in China.
“The IBM purchase might not have been worth the money,’’ said Francis Lun, general manager of Fulbright Securities Ltd in Hong Kong.
“The problem is much deeper than we thought,” Lun said.
The company was expected to post a HK$390 million loss in the quarter, according to the median forecast of five analysts surveyed by Bloomberg. Sales rose to HK$24.4 billion from HK$4.71 billion a year earlier. For the full year, net income fell to HK$173.2 million, or 1.9 HK cents a share, from HK$1.12 billion, or HK$0.15, a year earlier, the company said in a statement to the Hong Kong Stock Exchange.
The company was expected to post full-year profit of HK$538 million, according to the Bloomberg survey.
The earnings announcement was the first full-year result under chief executive William Amelio, who took over from former IBM general manager Stephen Ward in December. Amelio, who joined Lenovo from Dell, said in February the company will try to replicate its successful business model in Greater China on the international market
Lenovo relocated its headquarters from Beijing to New York after the IBM merger.
The company’s global market share for PCs fell from 7.7 percent to 6.6 percent in the first three months of the year, after it lost former IBM customers in markets outside Asia, according to Norman Zhang, an analyst at Tai Fook Securities in Hong Kong.