Lenovo more than doubles quarterly profit on demand for premium PCs

China’s Lenovo group more than doubled its net profit in the fiscal first quarter to June, to a record $466 million from $213 million a year earlier.

In addition to continued strong demand in the consumer market for PCs, the company said the commercial market started to recover, supporting 27 percent annual growth in revenues to USD 16.9 billion.

Lenovo, the world’s biggest maker of personal computers, posted a better-than-expected jump in first-quarter profit as Covid-19 curbs continued to spur work-from-home demand. Shares in the company rose by as much as 9.7 per cent after its results, and were on course for their biggest daily percentage gain since March 30th.

Revenue rose 27 per cent to $16.9 billion from $13.3 billion a year earlier, while it is expected for revenues to reach $16 billion.

It also posted net income margin of 2.8 per cent, which the company said was the highest in many years, noting that a recovery in IT spending was fuelling demand and supporting higher average selling prices of its products, and it expected the total personal computer market would continue to grow over the next five years.

“The accelerated digital and intelligent transformation has created significant market opportunities globally,” Lenovo’s chairman and chief executive Yuanqing Yang said.

We will continue to increase R&D investment, aiming to double it over the next three years, he emphasized.

As such, the results were the first earnings released by the company since it reorganised its business groups in February.

However, analysts say pandemic-driven consumer demand for PCs is starting to slow, but shortages of components like chips, driven by stronger-than-expected global demand for PCs, tablets, and electronic cars, remain an industry concern. Worldwide shipments of personal computers rose 13 per cent year-on-year to hit 82.3 million units in the second quarter of 2021, with desktop shipments growing for the first time since the fourth quarter of 2019, research firm Canalys said in a report last month.

Lenovo extended its industry lead, shipping more than 20 million units for the third consecutive quarter to take 24.4 per cent market share, compared with HP Inc with 22.6 per cent and Dell with 17 per cent, Canalys said. – Reuters