PC industry slump drags Lenovo's revenue down, but profits are up

Strategic cost-cutting is working, says Lenovo

Lenovo ThinkPad

Lenovo's revenue might have hit a sizeable speed bump with its latest fiscal report for Q3, but through cost-cutting measures the company still managed to see a big rise in net profit.

We've all doubtless heard about the big slowdown in the PC industry recently, and naturally given that Lenovo is the top PC vendor, that's certainly one of the "industry headwinds" that the company said contributed to an 8% decline in revenue compared to last year.

And softer phone sales were another factor which meant Lenovo only managed to rake in $12.9 billion total revenue (around £9 billion, or AU$18.3 billion).

As mentioned, net income rose considerably though, hitting $294 million (around £205 million, AU$415 million) which was a rise of 14% year-on-year. Reported pre-tax income was $320 million (around £220 million, AU$450 million), up slightly more at 17%.

Lenovo noted that the strategic "realignment" it kicked off last August to make cost savings was on track to ensure $1.35 billion (around £940 million, AU$1.9 billion) in savings across the full year, giving it a "cost structure that is significantly lower than its peers".

While Lenovo remained top PC vendor with a 21.6% market share (according to IDC), sales of its PC division dropped by 12% with quarterly revenue being $8 billion (around £5.5 billion, AU$11.3 billion). Pre-tax income slumped 18% to $405 million (around £290 million, AU$570 million) thanks to what Lenovo described as a greater than expected slowdown in the PC market (along with unfortunate global currency fluctuations).

Mobile and enterprise

As for the mobile group, which includes Motorola phones, in total it sold 20.2 million units in Q3, a drop of 18% year-on-year. Sales hit $3.2 billion (around £2.2 billion, AU$4.5 billion) which was down 4% on the previous year.

The bright spot for phones was outside of China, where Lenovo witnessed an overall 15% growth rate year-on-year, doing particularly well in emerging markets such as India where smartphone shipments were up 206%.

As for the enterprise group, comprising servers, software and services, that saw a robust rise with sales up 8% year-on-year to reach $1.3 billion (around £900 million, AU$1.8 billion). Lenovo said it is on course to hit its target of $5 billion (around £3.5 billion, AU$7.1 billion) for the enterprise business this financial year.

Article continues below