Lenovo posts 'solid results' in tough PC and tablet market

PC giant returns to profit despite sector slump, thanks in part to 'strong margins' in China and North America.

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Lenovo's Moto shipments were up almost 40 percent from the previous quarter "due to Moto G (pictured) and successful launches of new Moto Z and Moto Mods".

Image: Lenovo

The world's biggest PC vendor has announced its second-quarter results, with a return to profit despite tough PC and server markets.

Revenue stood at $11.2 billion, an eight percent decrease year-over-year, and a 12 percent increase over its first financial quarter. Pre-tax income for the second quarter was $168 million compared to a loss of $842 million in the same quarter last year. Net income stood at $157 million compared to $714 million in last year's second quarter.

Lenovo described this as "solid performance" at a challenging time in the industry, with both the PC and tablet markets down, and smartphones and servers showing only modest growth.

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"Market conditions remained challenging but we delivered solid results. Our PCSD business maintained leadership and strong profitability, our Mobile business had good quarter-to-quarter volume growth and margin improvement, and our Data Center business is actively addressing its challenges," said Yang Yuanqing, chairman and CEO of Lenovo. The company's profits were boosted by a $206 million asset sale, according to Reuters.

Gross profit for the second fiscal quarter increased two percent year-over-year, to $1.6 billion, with gross margin at 14.3 percent. Operating profit for the second quarter was $215 million, compared to a loss of $784 million at the same time last year.

Sales in Lenovo's PC and Smart Devices Business Group -- which includes PCs and tablets -- was $7.8 billion, a decrease of eight percent year-over-year. Pre-tax income was $405 million, an increase of three percent year-over-year, and the company said it benefited from "strong margins" in both China and North America.

Lenovo said it has now been the world's biggest PC vendor by market share for 14 consecutive quarters, with 21.5 percent market share. Lenovo shipped 14.5 million PCs in the second fiscal quarter, a 3.2 percent decrease year-over-year, but in a market that decreased 4.8 percent. In a tablet market that saw declines of 14.7 percent year-over-year, Lenovo said it "performed marginally better than the industry".

The mobile business group, which includes Motorola products and Lenovo-branded mobile phones, saw sales of $2 billion, down 12 percent year-over-year but up 20 percent compared to last quarter. The group showed a pre-tax loss of $156 million. Lenovo said mobile shipments grew 25 percent to 14 million, and revealed that Moto shipments were up almost 40 percent from the previous quarter "due to Moto G and successful launches of new Moto Z and Moto Mods".

The company's datacenter group -- which includes servers, storage, software, and services -- saw sales of $1.1 billion, an eight percent decrease year-over-year, and reported a pre-tax loss of $141 million, with a pre-tax profit margin of minus 13.1 percent.

Lenovo said it has a "focused execution plan for this business" and added: "We are also forging new industry partnerships and building next-generation IT to improve our competitiveness, as we have shown in our hyperscale business."

Sales in China declined four percent year-over-year to $3.2 billion, or 29 percent of the company's total worldwide sales. In Asia Pacific it booked sales of $1.9 billion -- 17 percent of the company's total, while in Europe, Middle East and Africa, Lenovo had sales of $2.7 billion, representing 24 percent of the company's total worldwide sales. In the Americas, sales in the second fiscal quarter declined seven percent to $3.4 billion, or 30 percent of the company's total.

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