Lenovo’s struggles continued as slumping PC sales and a precipitous drop in smartphone shipments in China pushed its quarterly revenue down 19 percent.
Revenue for the fiscal fourth quarter that ended March 31 totaled $9.13 billion, down from $11.33 billion a year ago. That’s more than $1 billion below the $10.47 billion in revenue projected by analysts polled by Bloomberg News and marks the second consecutive quarter that revenue declined after more than six years of rising sales.
Net income nonetheless rose 80 percent to $180 million as cost-cutting efforts delivered $690 million in savings over the second half of the fiscal year. Analysts were expecting net income of $184.9 million.
“Fiscal 2017 is going to be profitable, but the thing is with the current PC market, and we don’t know what the current mobile lineup is going to be like, we’re not sure what kind of profit to expect,” Chris Yim, an analyst at BOCOM International Holdings, told Bloomberg News.
Lenovo’s cost-cutting efforts, initiated in August, included the elimination of 3,200 white-collar jobs worldwide, or about 5 percent of the company’s total workforce, including 230 layoffs locally.
“While the market remains challenging in the short-term, we will continue to examine further actions needed to improve profitability,” CEO Yang Yuanqing told analysts during a conference call. “We have actions in place to drive sustainable growth and profit improvement, although these actions will take time to see results.”
The PC group’s sales fell 20 percent to $6.2 billion in the face of slack demand, even though the company padded its lead as the No. 1 PC company as its PC sales fell less than the overall market.
Shipments of the mobile group – which includes smartphones, tablets that use the Android operating system and smart TVs – fell 85 percent in the crucial China market. Lenovo is based in China but has a headquarters in Morrisville; the company employs about 3,000 workers in the Triangle.
Lenovo also has been straining to turn around the Motorola smartphone business that it acquired from Google in the fall of 2014 for $2.91 billion. In announcing its latest quarterly results Thursday, Google said that the integration of the Motorola business hasn’t met expectations.
The Motorola acquisition boosted Lenovo to No. 3 among the world’s smartphone companies, but it fell out of the top five in the latest quarter, according to market research firm IDC.
Quarterly revenue for Lenovo’s enterprise business group, which includes servers and storage devices, fell 8 percent.
PC sales in North America have been a bright spot for the company, said Emilio Ghilardi, who last month was promoted to president of North American operations. He noted in an interview that the company has been the fastest-growing PC maker in North America for the last 7 quarters.
Market research firm IDC reported that Lenovo’s PC shipments in the U.S. market rose 21.1 percent in the first quarter in spite a 5.8 percent overall decline in shipments. That boosted Lenovo’s U.S. market share to 14.1 percent, versus 11 percent a year ago.
“We feel very good about our model in North America,” Ghilardi said. “Growth is the rule of the game.”
Lenovo released its earnings before its stock-like American depositary receipts began trading Thursday. Its ADRs, which have fallen 62 percent over the past 12 months, closed Thursday at $12.28, down 66 cents.
For the full fiscal year, Lenovo generated $44.9 billion in revenue, down 3 percent. Its net loss for the year was $128 million, versus a profit of $829 million a year earlier.