Lenovo’s revenue picture improved as the company posted quarterly results that exceeded analysts’ expectations.
Although the No. 1 PC maker’s revenue declined 6 percent to $10.1 billion in the fiscal first quarter that ended June 30, that was a marked improvement over the 19 percent decline in the prior quarter and bested the $9.79 billion anticipated by analysts polled by Bloomberg News. Revenue decline four percent after adjusting for currency fluctuation.
Net income soared 64 percent to $173 million, with cost-cutting measures and a gain on the sale and leaseback of an office building in Beijing playing a significant role in the better-than-expected bottom line. Analysts were expecting net income of $111 million.
CEO Yang Yuanqing told analysts during a conference call that the markets that Lenovo competes in remain challenging.
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“The PC and the tablet markets declined, and the smartphone and the server (markets) were essentially flat year-on-year,” he said.
Lenovo is based in China but has a headquarters in Morrisville and employs about 3,000 workers in the Triangle.
Sales of PCs and tablets fell 7 percent to $7 billion in the quarter even though the company’s shipments in both segments outpaced the market.
The company’s mobile phone business, which has struggled since it acquired the money-losing Motorola brand, fell 6 percent to $1.7 billion. However, the company said that mobile revenue was nearly flat after adjusting for currency fluctuations.
“In mobile, our turnaround strategy is delivering results” as the company upgrades its product portfolio, Yang said.
He noted that in July the company launched the Moto Z smartphones in the U.S. market. Those phone can be transformed into, say, a projector or a boom box by attaching “Moto Mods” that snap on with magnets. They are available at Verizon stores and will be available in an “unlocked” version that can be used in conjunction with other carriers in the fall.
Yang, noting that the company also plans to launch these products in other parts of the world soon, said preliminary sales results have been good.
Emilio Ghilardi, president of North American operations, said in an interview that last quarter was “a quarter of transition” for smartphone sales.
Lenovo’s PC shipments in the U.S. rose 14.7 percent in the second quarter, far outpacing a 4.9 percent overall rise in the U.S. market. Lenovo ranks third in the U.S. PC market, behind HP and Dell, but has been steadily increasing its market share.
A critical component of that success, Ghilardi said, has been increasing the company’s retail presence. Today Lenovo PCs are available in 10,000 stores, up from 4,000 a year ago, after adding retailers such as Walmart and Costco.
As a result, he said, last quarter the company’s share of the U.S. retail market hit a new record.
“Compared to worldwide, we still have a lot to go,” Ghilardi said, noting that the company’s worldwide market share was 21.2 percent last quarter.
Lenovo, he added, has set a goal of boosting its U.S. market share on par with its worldwide market share over the next three years.