Hong Kong (Reuters): As global demand for electronics dropped, China’s Lenovo Group (OTC: LNVGY) Ltd. reported a 24% drop in sales for the third quarter. This was the biggest drop in sales in 14 years, and the company said it would look to cut spending and make changes to its workforce.
The biggest maker of personal computers (PCs) in the world said on Friday that sales for the quarter from October to December were $15.3 billion, which is 24% less than the same quarter last year. A group of seven analysts from Refinitiv came up with an average estimate of $16.39 billion for the results.
When COVID-19 broke out in 2020, many people chose to work from home and replaced or upgraded their equipment. This resulted in a significant increase in global electronics sales for Lenovo and its competitors.
But demand has started to go down, and from July to September last year, Lenovo’s sales started to go down.
Lenovo’s CEO, Yang Yuanqing, told analysts on a call after the company’s earnings report that the PC and mobile markets as a whole had a “severe downturn” in the last quarter and that the company was trying to cut costs and improve efficiency.
Lenovo wants to cut its operational costs by about $150 million, said Wong Wai Ming, its chief financial officer. This is part of a long-term plan to double its net margin.
“This includes lowering operational costs as a whole and making changes to the workforce where necessary and helpful,” he said.
Wong didn’t say if this would mean laying off people.
Rivals Both Dell Technologies Inc. (NYSE:DELL) and HP Inc. (NYSE:HPQ) have said they will lay off workers. Dell said it will cut about 6,650 jobs, which is about 5% of its global workforce. HP expects to cut up to 6,000 jobs by the end of fiscal 2025, which is about 12% of its global workforce.
For the October-December quarter, Lenovo’s net income for shareholders fell by 32%, to $437 million. On Friday, shares of Lenovo in Hong Kong fell 3.14 percent.
IT research company Gartner (NYSE:IT) said last month that PCs and mobile phones are likely to ship less in 2023 for the second year in a row. Gartner says that PC sales are likely to drop 6.8% this year and 16% in 2022.
Lenovo said that the market was still getting rid of too much inventory, which could take one or two more quarters. But Yuan said that data about how many devices were turned on showed that real demand wasn’t as bad as it might seem.
“The PC market will start growing again in the second half of the year,” he said.
