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China’s Top PC Maker Lenovo Makes Profit Above Estimates as Sales Beat

Lenovo Group’s profits surpassed estimates after China’s top PC maker relied on new companies to weather an unprecedented decline in global computer demand.

The profit of Lenovo Group Ltd. surpassed estimates after China’s largest PC maker relied on new companies to weather an unprecedented decline in global computer demand.

Net income reached $541 million in the quarter ended September, the company said in a statement Thursday. The average analyst estimate was $473 million. Revenue fell to $17.1 billion for the first time in more than two years, but still beat the $16.9 billion analysts had forecast.

Lenovo and its rivals Dell Technologies Inc. and HP Inc. grappling with a global PC market that has seen its strongest quarterly decline ever – its fourth consecutive drop in shipments. In Lenovo’s home market, Beijing appears to be prioritizing Covid Zero over the economy, leading to lockdowns in major cities, stifling retail demand and disrupting manufacturing.

What Bloomberg Intelligence says

A longer macroeconomic overhang is likely to lead to another year of decline for the PC market in 2023, although there is room for a rebound later in the year and potential for a return to growth in 2024. We have set our target for the shipping PCs reduced by 1 before 2023. % to 281 million, which is a decrease of 3% per unit.

– Woo Jin Ho, Analyst

Outside of China, the global technology outlook is clouded by a plethora of restrictions Washington imposed last month on chips and technology exports to China, which threaten to limit shipments to the world’s largest PC and semiconductor market. Intel Corp. plans to cut its workforce significantly, likely in the thousands, Bloomberg News reports.

Lenovo is counting on growth from companies outside its bread-and-butter division — such as in servers, cloud computing and data storage — to offset deteriorating PC sales. But the core division still delivers about four-fifths of sales.

“Demand cracks are extending into enterprise hardware end markets, including PCs and data center infrastructure,” Morgan Stanley analysts wrote this month.

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