Lenovo reports first loss in 6 years

GMT 20:29 2016 Thursday ,26 May

Arab Today, arab today Lenovo reports first loss in 6 years

Lenovo reports first loss in 6 years
Hong Kong - Arab Today

China’s Lenovo Group Ltd. , the world’s biggest maker of personal computers, reported its first loss in six years, hit by exceptional acquisition and restructuring costs as well as weak sales for its smartphones business.
With its shares at a near five-year low, the Hong Kong-listed company is also looking at the possibility of a listing back in China, adding to the growing number of Chinese companies heading back home as restrictions on capital flows to and from China create strong demand for locally-listed stocks.
Mainland firms have long been attracted to Hong Kong’s standing as a global financial hub, stable legal regime and large pool of investors but the downside is that share prices can be higher in China.
“We have been looking for ways to raise value for shareholders. Listing in another market is an option and China is a good market,” Lenovo’s president and chief financial officer Wong Wai Ming said.
Lenovo booked a net loss of $128 million for the year ended March 31, which compared with a profit of $829 million the previous year and analysts’ expectations for a loss of $123.6 million, according to Thomson Reuters SmartEstimates.
Revenue fell 3 percent to $44.9 billion, although at constant currency exchange rates revenue rose 3 percent. In the fourth-quarter alone, revenue fell 19 percent as Lenovo seeks to shift its reliance on the slowing PC industry toward smartphones and servers.
It said profits were pulled down by costs incurred following its acquisitions in 2014 of the Motorola phones business from Google and the low-end server arm of International Business Machines Corp.
It also booked a charge of $923 million for costs related to restructuring the businesses and clearing out smartphone inventories.
“These results show integration efforts did not meet expectations,” Chief Executive Yang Yuanqing said in a Hong Kong Stock Exchange statement, pointing to an 85 percent decline in phone shipments in China.
However, when asked at a news conference, Yang said the company had never regretted acquiring Motorola.
“Otherwise, we would not have had the global footprint we see today. We are the top among Chinese handset companies,” he said, although he added that better integration was needed going forward to improve products and operating efficiencies.
Cuts in handset subsidies by local network providers and sluggish demand in emerging markets contributed to Lenovo’s global smartphone shipments falling 32 percent to 11.5 million in the first three months of 2016 from the same period last year, according to data from researcher TrendForce.
Meanwhile shipments of PCs, still Lenovo’s largest business, fell 7 percent in the last quarter compared with a 9.6 percent drop in the overall market, according to researcher Gartner.
But smartphones are Lenovo’s biggest challenge and a turnaround in the foreseeable future is unlikely, Jefferies analyst Ken Hui said in a note to clients, highlighting competition in emerging markets such as India and Brazil.
Lenovo’s shares closed down 0.4 percent at HK$4.99 prior to the earnings announcement, leaving the shares at their lowest level since October, 2011.

Source: Arab News

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