Lenovo, the world’s largest personal computers manufacturer, was hit by the market slowdown, which has also affected major electronic giants around the world.
The company’s earnings have been pulled down by acquisition and restructuring costs as well as weak sales of smartphones and personal computers (PCs).
Lenovo announced the results on Friday for its fourth fiscal quarter and full-year ended March 31, 2016. Though the company strengthened its core PC business, enhanced its cost structure and protected its profit, there were internal and external challenges that impacted revenue.
Total revenue was US$9.1 billion, down 19 per cent Y-o-Y, while annual revenue was US$44.9 billion, down 3 per cent Y-o-Y. At the same time, the largest restructuring program in Lenovo’s history delivered a better cost structure with US$690 million of savings in the second half of the year, sending fourth quarter PTI up 86 per cent Y-o-Y to US$193 million.
Annual loss before tax was US$277 million. Fourth quarter net income was up 80 per cent Y-o-Y to US$180 million, while full year net loss was US$128 million, even after US$330 million in non-cash M&A related accounting charges.
The results come as Lenovo curbs its reliance on the slowing PC industry in favour of smartphones and servers. It said profit was pulled down by costs of multi-billion dollar acquisitions in 2014 — for the Motorola handset division of Google and low-end server arm of International Business Machines.
The China Story
According to a report in Reuters, Lenovo is planning a listing in China with an aim to raise value for shareholders. Lenovo will be among the growing number of Chinese companies, as restrictions on capital flows in and out of China demand locally-listed stocks.
But the company suffered a major setback in China, where its mobile phone shipments declined 85 percent in the fourth quarter. However, it reported a $2.3 billion in revenue in the fiscal quarter, which made up 26 per cent of the company’s worldwide revenue. Lenovo’s global mobile business forged an incredible growth outside China.
Out of 66.1 million smartphone shipments in the full year, 51 million were shipped internationally. The overall mobile business group (MBG) sales, which includes, mobile phones, Android tablets and smart TVs, was $1.7 billion and Motorola’s smartphone shipments contributed $1 billion.