Lenovo's annual revenue up 20% but profits miss target

Lenovo's CEO Yang Yuanqing addresses a press conference in Hong Kong on May 21, 2015. China's Lenovo said its revenue rose 20 percent in its past fiscal year, helped by its purchase of Motorola. PHOTO | AFP 

In Summary

• Smartphone shipments worldwide grew more than 50 percent year-on-year to 76 million "driven by aggressive business expansion in emerging markets outside of China from Lenovo brand products and strong growth of the Motorola brand products", it added.
• The group's non-PC revenue contribution rose to 28 percent from 18 percent in the same period last year, while operating expenses were up almost 40 percent at $5.57 billion.

By AFP
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HONG KONG

China's Lenovo said Thursday revenue rose 20 percent in its past fiscal year, helped by its purchase of Motorola last year as the PC maker diversifies into the smartphone market, but net profit growth slowed to just one percent.

The world's biggest personal computer maker said revenue reached $46.30 billion for the year ending March 31.

Revenue from the company's mobile business including Motorola increased 71 percent year-on-year to $9.14 billion, making up about a fifth of the revenue total.

But net profit was up only one percent at $829 million owing to increased operating expenses, the company said in a filing to the Hong Kong stock exchange.

That was slightly below the expected net average of $830.2 million by 26 analysts polled byBloomberg News, which said it was the slowest net profit growth in five years.

The PC maker had seen its net profit rise 29 percent in the previous financial year, driven by record smartphone sales.

"The rise of new technology and market trends, particularly the social mobile Internet, has posed market opportunities and challenges as consumer behaviour is changing," the company said in the filing.

MOBILE BUSINESS

Smartphone shipments worldwide grew more than 50 percent year-on-year to 76 million "driven by aggressive business expansion in emerging markets outside of China from Lenovo brand products and strong growth of the Motorola brand products", it added.

The group's non-PC revenue contribution rose to 28 percent from 18 percent in the same period last year, while operating expenses were up almost 40 percent at $5.57 billion.

Simsen Financial Group associate director Jackson Wong said the results were a good sign, but investors are hoping the company will speed up the development of its mobile business.

"It's not that bad, it's just that a major part of their profit is still from the PC side," Wong said, explaining that it is an industry that is receding.

"They need to grow their mobile side at almost 100 percent annually so that in three to four years the mobile side will attribute more revenue," he said.

"The industry is transforming so quickly, so they cannot do it slowly."

The group's PC revenue rose five percent year-on-year to $33.35 billion for the reported period, with revenue from the sector representing over 70 percent of its total revenue.

"Lenovo believes its strong PC leadership remains a solid profit engine with plenty of further opportunities for profitable growth," it said.

In its third quarter results published in February, Lenovo said mobile phone shipments had surged almost 80 percent thanks to its $2.9 billion purchase of Motorola from Google in October.

That buyout happened soon after Lenovo paid $2.3 billion for IBM's low-end server business as it looked to diversify beyond PCs.