Lenovo returns to sale growth in Q4

The profit dipped by 41% and revenue jumps by 5% as PC shipments show improvement

China's Lenovo Group Ltd, the world's largest personal computer (PC) maker, reported a return to profit on Thursday but said rising component prices could pressure its bottom line this year as supply shortages extend to batteries.

Profit reached $535 million in the year to March on revenue that fell 4 per cent, just missing analyst estimates. The news sent Lenovo shares up as much as 6 per cent in Hong Kong trade.

The result comes as Lenovo navigates a PC market that has shrunk markedly since the advent of tablet computers. According to researcher Gartner, global PC shipments fell for the 10th consecutive quarter in January-March, dipping below 63 million units for the first time since 2007.

Lenovo's annual shipments fell 1 per cent versus a market decline of 3 per cent, with its share rising 0.4 percentage point to a record 21.4 per cent. Revenue in its PC and smart devices unit - which makes up 70 per cent of the total - fell 2 per cent.

The company blamed the declines on transition in its smartphone and data centre businesses, as well as on a difficult macro environment and component supply constraints.

Memory shortage is likely to continue this year, particularly solid-state drives (SSD), pushing up parts costs, said Corporate President and Chief Executive Officer Gianfranco Lanci at an earnings briefing.

"We are starting to see shortage in batteries," Lanci added. "That is mainly because of cars consuming many more batteries than before."

Lanci said it could take a year for battery suppliers to catch up with demand and for prices to normalise, having risen by a single digit per cent so far this year.

MOBILE LOSS

Lenovo's mobile business, which accounts for 18 per cent of revenue, booked a loss which widened somewhat to $566 million, though the firm said it was enjoying strong growth in Latin America and Western Europe.

In an interview, Chairman and Chief Executive Officer Yang Yuanqing said reorganising its China business, announced last week, would not affect mobile, which will be the third line of business outside of PCs and smart devices, and data centres.

"We need to improve our China consumer strategy ... sharpen our brand, and transform our retail system," Yang told Reuters.

Lenovo's data centre business, which includes servers and enterprise services, booked a loss of $343 million.

For the three months through March, profit fell 41 per cent to $107 million on revenue that rose 5 per cent.