China's Lenovo returns to profit as PC performance beats overall market

By Sijia Jiang

HONG KONG (Reuters) - China's Lenovo Group Ltd, the world's largest personal computer (PC) maker, on Thursday said it returned to profit in a year when its PC shipments fell at a slower rate than the overall market as consumer demand continued its downward trend.

Profit reached $535 million in the year to March, reversing a loss of $128 million a year prior and missing the $569 million average of 24 analyst estimates in a Thomson Reuters Poll. Revenue fell 4 percent to $43 billion.

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

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

The company blamed the decline in results on transitions in its smartphone and data centre businesses, as well as a difficult macro environment and component supply constraints in the second half of the year.

"Despite market conditions that will remain challenging in the short term, the Group exited the year with stronger organization allowing for sharper customer focus and more compelling product portfolio across all our business," Chairman and Chief Executive Officer Yang Yuanqing said in a filing.

MOBILE LOSS

PC competition took a step up this week when China's largest mobile phone maker, Huawei Technologies Co Ltd, said it would enter the market for premium consumer models.

Lenovo also competes with Huawei in mobile, which accounts for 18 percent of revenue. The unit's loss widened to $566 million from $469 million a year prior, though Lenovo said it had strong growth in Latin America and Western Europe.

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

Yang said Lenovo's core PC business remained solid, transformation for its mobile business was on track, and it is accelerating efforts to improve its data centre business.

For the three months through March, profit fell 41 percent to $107 million on revenue that rose 5 percent to $9.58 billion.

(Reporting by Sijia Jiang; Editing by Christopher Cushing)