Hong Kong (Reuters) – Lenovo Group (OTC:LNVGY), which makes more personal computers than any other company in the world, had flat sales for the quarter from April to June when many Chinese cities were locked down because of COVID-19. This was its slowest performance in nine quarters.
The total revenue for the period was $16.96 billion. This was up 0.2% from the same quarter last year, but it was the same as the average estimate from seven analysts on Refinitiv, which was $16.87 billion. That was the smallest increase since the time period ending in March 2020.
Lenovo, on the other hand, has made a lot of progress in expanding into higher-margin businesses like server operations, IT services, and mobile devices. These businesses now make up 37% of the company’s revenue. For the quarter, the net income that went to shareholders went up by 11%, to $516 million.
Lenovo’s chairman and CEO, Yang Yuanqing, said that the company is “moving away from just making PCs and toward making a wide range of intelligent products and solutions.”
Lockdowns in China during the quarter hurt the PC supply chain. According to a report by research firm Counterpoint, major laptop manufacturing partners like Quanta, Compal, and Wistron had trouble making laptops because of the lockdowns. It also happened at the same time that the global PC industry was coming off a sales boom caused by the pandemic and the war in Ukraine. This led chipmakers and electronics makers like Intel (NASDAQ:INTC) and Samsung (KS:005930) to warn of a sharp drop in demand.
Counterpoint says that shipments fell 11.1% from the same time last year to the last quarter. This is the biggest drop from one year to the next since the second quarter of 2013. Counterpoint said that Lenovo’s total shipments of PCs dropped 12.7% to 17.4 million units. This was mostly because consumers didn’t buy as many PCs. But with a 24.4% share of the global PC market, Lenovo kept its top spot.
Yang said that he thinks the number of PCs shipped around the world this year will be between 300 million and 310 million. The number of units shipped last year, which was 341 million, would drop by almost 10% if that happened.
But Yang said that the shortages in the supply chain that hurt many hardware makers earlier this year have gotten better.
“We still have a shortage in some areas, especially in the data center business,” he said. “But in general, I don’t see any big problems in the second half of this year.“
He also said that Lenovo has seen some price increases in the semiconductor industry, but that the company would continue to be flexible when it comes to changes in component prices.
Lenovo wouldn’t say anything about its sales in Russia or how the war in Ukraine has affected its business this quarter.
Chinese media reported last month that Lenovo was looking to hire engineers who work on self-driving cars. Yang wouldn’t say anything about how the company got into the mobile business.
At HK$7.03 ($0.8956), Lenovo’s shares on the Hong Kong Stock Exchange were down 0.3%, while Hang Seng as a whole was down 1.9%.
(The headline and first paragraph of this story have been changed to show that sales growth was the slowest in nine quarters, not eight. (This removes a word that is used twice in the second paragraph.)
