Lenovo plans job cuts as weak PC demand continues
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Chinese company Lenovo reported its first profit fall in almost three years and warned of job cuts as the world’s largest computer maker continued to suffer from slowing demand for PCs and other smart devices.
Net income for the December quarter fell 32 percent year over year to $437 million for the first time since 2020. Revenue fell for the second straight quarter, plummeting 24 percent to $15.3 billion. The figure was well below the $16.4 billion predicted by analysts polled by Refinitiv. Lenovo shares fell more than 3 percent in Hong Kong on the news.
“The smart device market is at its worst,” Lenovo CEO Yang Yuanqing said on a conference call.
The company would need to cut costs by making staff adjustments and recruiting at companies with high growth potential, he added.
Wong Wai Ming, chief financial officer, said operating expenses would need to be cut by about $150 million to double the company’s net margin.
Lenovo is pioneering an industry in decline after the boom years of the pandemic, which saw a huge surge in consumer electronics sales fueled by the shift to remote working. With major economies now suffering from inflationary pressures and facing a recession, global PC demand has fallen and consumers and businesses have become more cautious about their spending.
Yang said he believes the market is still digesting pandemic-era inventory as well. “We believe market demand is not as bad as many expected,” he said, predicting that the PC market will start growing again in the second half of the year.
Research firm IDC had reported a 28 percent annual decline in global PC shipments to 67.2 million units in the fourth quarter of 2022, while its competitor Gartner forecast shipments of PCs and mobile phones would continue to fall this year, albeit at a slower pace Rate. PC shipments were expected to fall 6.8 percent this year after falling 16 percent in 2022, it said.
While Lenovo maintained its leadership position over HP and Dell in its core PC market, research group Canalys reported that it lost its number one position to Apple in the fourth quarter in adding tablets to notebooks and desktops, according to IDC. Lenovo shipped a total of 17.9 million units at the time, 32 percent fewer than the previous year.
