Lenovo’s growing share of the worldwide PC market and improved efficiencies powered the company to better-than-expected fourth-quarter profits. But revenue, hampered by a strong U.S. dollar, fell short.
Although net income in its fiscal fourth-quarter fell 37 percent to $100 million, that was better than the $91.6 million anticipated by analysts polled by Bloomberg News. A $94 million non-cash acquisition charge weighed down the results.
Currency fluctuations also had a significant impact.
Revenue in the quarter rose 21 percent to $11.3 billion, but would have been 28 percent higher if not for currency fluctuations. Analysts were expecting more revenue – $12.1 billion. Two major acquisitions completed last fall – a line of servers from IBM and the purchase of the Motorola cellphone business from Google – contributed to the growth.
“Lenovo’s increasing market share in PCs helped them leverage scale to cut costs and boost margins,” Vincent Chen, an analyst at Yuanta Financial Holding, told Bloomberg. “The rising U.S. currency hurt both demand and their pricing during the period.”
Lenovo, the world’s No. 1 PC maker, is based in China but has a headquarters in Morrisville.
“We had a strong performance in all our businesses led by our PC growth, which has now held at a No. 1 position for eight straight quarters,” CEO Yang Yuanqing said during a conference call with analysts.
Sales in China, which accounted for 27 percent of total revenue, were flat. Market research firm IDC reported that shipments of smartphones fell in China last quarter for the first time in six years, with Lenovo’s smartphone shipments falling 22.1 percent.`
Lenovo’s shift to diversify beyond the PC, which was behind the decision to spend $5 billion to acquire the IBM and Motorola businesses last fall, was evident in the fourth-quarter results.
Revenue from PCs accounted for 63 percent of total sales, down from 83 percent a year ago. Mobile products, including smartphones and tablets, accounted for one-quarter of sales; enterprise products, which includes servers and data storage devices, accounted for nine percent.
Lenovo ranks No. 3 in both smartphone and server sales worldwide.
Yuanqing said the integration of IBM and Motorola businesses is “on track” and that he remains confident that the money-losing Motorola business will become profitable by next year.
In PCs, the company added to its leading worldwide market share in the latest quarter by boosting shipments by 3.4 percent, in spite of a market that declined by 6.7 percent overall, according to market research firm IDC. That gave Lenovo a 19.6 percent market share, up from 17.6 percent a year ago.
In the U.S., Lenovo ranked third with an 11.8 percent market share, up from 10.7 percent a year earlier, according to IDC.
Aymar de Lencquesaing, who became president of Lenovo's North American's operations last month, said in an interview Thursday that there’s no reason Lenovo shouldn’t rank No. 1 in the U.S. as well.
“We want to double our market share as quickly as possible, in PCs for sure, but also in the server and tablet space,” he said.
Toward that end, more than 2,000 Walmart Supercenters recently began selling a Lenovo tablet for the first time, de Lencquesaing said. Other Lenovo products also are headed for the retailer’s shelves.
“In consumer, it’s all about coverage,” he said. “You need to be on the shelves in a number of retail locations. ... We’re in active mode right now for expanding our retail footprint.”
De Lencquesaing previously was Lenovo’s president of EMEA, or Europe, the Middle East and Africa. Under his leadership in the fiscal third quarter, EMEA sales jumped 40 percent, giving the company a record 19.7 percent market share.
Lenovo has 60,000 workers worldwide, including about 3,350 locally. Earlier this month the company laid off 235 employees across the U.S., including 165 in the Triangle.
A majority of those who lost their jobs locally are former IBM employees that Lenovo absorbed along with the line of servers it acquired. When Lenovo acquired the server business from IBM, its Triangle workforce increased by about 1,300 workers.
For the full fiscal year that ended March 31, Lenovo generated $46.3 million in revenue, up 20 percent from a year earlier. Profit totaled $829 million, up 1 percent.
Lenovo’s American depositary receipts, which are akin to stock, closed Thursday at $34.80, up 32 percent. The company’s ADRs hav risen 33 percent this year.