Lenovo Group Ltd’s (聯想) earnings climbed 6 percent after China’s top PC maker relied on cost reductions and new businesses to weather an unprecedented slump in global computing demand.
Net income rose to US$541 million in the previous quarter, the company said yesterday.
The average analyst estimate was US$473 million. Sales declined for the first time in more than two years to US$17.1 billion, but still beat the US$16.8 billion analysts predicted.
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Lenovo and rivals Dell Technologies Inc and HP Inc are struggling with a global PC market that saw its steepest quarterly drop on record — the fourth straight decline in shipments. In Lenovo’s home market, Beijing appears to be prioritizing a “zero COVID” strategy over the economy, triggering lockdowns in major cities, smothering retail demand and disrupting manufacturing.
Lenovo could not sell some of its most advanced computers to clients in China because of the latest US chip curbs, chairman Yang Yuanqing (楊元慶) said.
The effect on Lenovo’s sales is limited because such products are only a small part of the company’s business in China, Yang said.
“It will not impact our general-purpose server, storage or other infrastructure sales,” he said, adding that cost management is to be a priority for Lenovo in the coming quarters.
Lenovo last quarter lowered spending on research and development as well as advertising and promotions to support its profit margins. It also spent less on employee benefits and rent.
However, Lenovo is not contemplating large-scale layoffs, Yang said.
“We must ensure the competitiveness of our business. We must ensure the expense to revenue is competitive,” he said.
The company has been counting on growth from businesses beyond its core division — such as in servers, cloud computing and data storage — to help offset worsening PC sales.
However, its main division still yields about 80 percent of revenue.
“Demand cracks are spreading to enterprise hardware end-markets, including PCs and data center infrastructure,” Morgan Stanley analysts wrote this month.
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