Quarterly Numbers Good for Lenovo, Bad for PCs in General

Lenovo's Touch Combat KitThe PC market is a tough place even for the world’s largest maker of the increasingly commoditized gear. Lenovo Group this week boasted a 36 percent jump in profits last quarter, a number that mask a troubling decline in PC sales and stagnation in Lenovo market-leading laptops.

Lenovo announced earnings of $220 million for the quarter that ended on Sept. 30 with revenues up 13 percent from last year to $9.8 billion. The harsh reality, however, is that much of that windfall was powered by a near doubling in the sales of smartphones and tablets.

When it came to PCs and laptops, an area of traditional strength for the Chinese vendor, the news was pretty bleak. Sales of desktops dropped 3 percent to $2.7 billion, while laptop sales climbed a tepid 8 percent to $5 billion.

Compare that to the sales of Lenovo smartphones and tablets, which skyrocketed 106 percent from a year ago to $1.5 billion. That means sales of mobile devices now account for 15 percent of Lenovo’s total revenues, up from 9 percent just one quarter ago.

“Tablet growth continues shifting to mainstream and entry-level segments, as well as emerging markets. These are Lenovo’s strength areas,” Lenovo’s chairman and CEO Yang Yuanqing said “We are confident that we will capture these opportunities and continue our strong growth.

“We are optimistic about the industry’s outlook,” Yang added.

IDC Corp. last month noted yet another drop in global PC sales, which were down 8.6 percent in the third quarter. Weak demand in for new desktops and notebooks in an unusually quiet back-to-school season, as well as the continued end user preference for tablets, is to blame, the analyst firm said.

Lenovo has been girding itself for the sea change in the end-user devices market of late, even tapping Two and a Half Men star Ashton Kutcher as its newest product engineer. The popular actor is said to be working with the company’s global engineering teams to develop and market Lenovo’s Yoga line tablets, providing input and making decisions about the Yoga devices’ design, specs, applications and use.

The Lenovo announcement came just days after Taiwanese gear vendor Acer announced a restructuring plan and the resignation of its CEO, J T Wang, following worse than expected financials for its third quarter.

Acer said it plans to cut its global workforce by seven per cent from next year, to generate $100 million in savings annually. The company posted an 11.8 percent drop in revenue for Q3 to $3.11 billion, and an operating loss of $86.6 million, blaming, in part, the impact of gearing up for selling units loaded with Microsoft Corp.’s Windows 8.1 along with the churn in the PC and laptop market in general.