Lenovo Group Ltd (聯想), China’s biggest personal-computer maker, said slowing demand from corporate customers posed an “unprecedented challenge,” after the company posted profit that was a third of what analysts estimated.
Lenovo shares slumped as much as 20 percent in Hong Kong trading after chief executive officer William Amelio said a “dramatic” slowdown in sales to companies would persist for several more quarters. The Chinese PC maker would cut costs and focus on expanding sales in emerging markets to lift profitability, he said on a conference call yesterday.
Profit in the second quarter ended Sept. 30 fell 78 percent to US$23.4 million as corporate clients in the US slowed spending amid turmoil in financial markets, Lenovo said. The maker of Thinkpad laptops lost market share in Asia and Europe as bigger rivals Hewlett-Packard Co, Dell Inc and Acer Inc (宏碁) added lower-cost products and stepped up discounts.
“Profitability has come down quite markedly as Lenovo is forced to cut prices in response to the fierce competition,” said Frank He, who rated Lenovo shares “market perform” at BOC International (Holdings) Ltd (中銀國際控股) in Hong Kong. “The company will continue to be under pressure from Hewlett-Packard and Dell.”
Revenue excluding the effects of currency fluctuations fell 5 percent, chief financial officer Wong Wai Ming (黃偉明) said in the conference call yesterday. Shipments in the US, Lenovo’s biggest market outside China, fell 9 percent, Wong said.
Gross profit margin, or the percentage of sales left after deducting production costs, narrowed to 12.6 percent, from 15 percent a year earlier, as the Chinese company faced “aggressive pricing pressure” and a strengthening of the dollar, he said.
Lenovo cut jobs in the fiscal second quarter and “will continue to take action to reduce costs,” Wong said.
Lenovo’s share of global PC shipments fell to 7.4 percent in the three months to September, from 7.9 percent in the previous quarter, research company IDC said.
Acer, which overtook Lenovo as the third-biggest PC maker after acquiring Gateway Inc and Packard-Bell BV, increased its market share to 12.5 percent from 9.3 percent a year earlier, IDC said.
The Taiwan company gained sales after introducing so-called netbook laptops aimed at tapping demand for smaller computers, said the Framingham, Massachusetts-based researcher.
Lenovo started selling netbooks last month as part of plans to expand its range of products for consumers. Hewlett-Packard, the biggest PC maker, offered the products from April, while second-placed Dell followed in September.
Revenue in China, Taiwan and Hong Kong rose 11 percent to US$1.9 billion, Lenovo said. Sales in Europe, the Middle East and Africa increased 0.6 percent to US$890 million.
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