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Lenovo Skids on Price Warning Despite Doubling First-Quarter Profit
Zhao Chenting
DATE:  Aug 16 2019
/ SOURCE:  yicai
Lenovo Skids on Price Warning Despite Doubling First-Quarter Profit Lenovo Skids on Price Warning Despite Doubling First-Quarter Profit

(Yicai Global) Aug. 15 -- Lenovo Group's stock price slumped after the world's biggest maker of personal computers said it may be forced to increase prices if the US hikes import tariffs. 

Lenovo's shares [HKG0092] ended 6 percent lower today at HKD5.64 (72 US cents) each, recovering from an 8.8 percent dip from yesterday's closing price of HKD6. Hong Kong's benchmark Hang Seng Index rose 0.8 percent.

Retail prices of the company's PCs, smartphones and other electronic products would rise if the US government increased tariffs, Chairman Yang Yuanqing said on an earnings conference call today.

US President Donald Trump said two days ago that his administration would delay until the middle of December imposing an extra 10 percent tax on imports of consumer goods from China. The tariffs were due to kick in on Sept. 1.

A twofold increase in Lenovo's net profit in its first quarter failed to take the edge off of Yang's price warning.

Net profit came in at USD162 million in the three months ended June 30, beating market expectations, boosted by a strong showing at the Beijing-based company's PC business. Revenue expanded for an eighth straight quarter, gaining 5 percent to USD12.5 billion, in line with forecasts.

Revenue at Lenovo's PC business, which accounts for more than 75 percent of its total income, jumped 12 percent to USD9.6 billion. Yang told Yicai Global that Lenovo has opened up new market space in high-growth and high-end PC segments.

Workstation revenue surged over 42 percent, gaming PC income rose by a third, while Ultrabook revenue jumped 29 percent and Chromebook income soared about 90 percent, per the data.

Smart Future

In addition to swelling high-end subcategory product income, Lenovo has also announced its futuristic new fifth-generation wireless notebook Project Limitless and folding screen computers.

Aside from releasing new intelligent PC models such as 'the world's first folding screen computer' and 'the world's first 5G PC,' the company will also focus on smart home and smart office applications and promote more new types of intelligent devices, said Yang, adding it will also actively seize the huge opportunities presented by the commercial Internet of Things.

Lenovo's data center business reported revenue of USD1.4 billion in the fiscal quarter, equal to 11 percent of the company's total revenue, down 17 percent from a year earlier. The data center service sector is plagued by sluggish demand, Yang said.

The main challenge is that some hyperscale data centers stockpiled massively after last year's substantial growth, while Lenovo's data center business was inevitably affected by industrial demand adjustment as commodity prices plummeted, he said.

Lenovo delivered 58.5 million units to take a 22.5 percent share of the worldwide market last year, followed by US companies HP and Dell in second and third places, per data compiled by Stamford, Connecticut-based analyst firm Gartner.

Editors: Tang Shihua, Ben Armour

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Keywords: Lenovo