As the supply of personal computers (PCs) continues to exceed the demand for them, China’s Lenovo Group Ltd. (0992. HK) reported on Thursday that its revenue for the three months that ended in September fell by 16%, which was in line with what the market was expecting.
This is the fifth consecutive quarter that the world’s largest PC maker has suffered a sales decrease as it continues to digest excess inventory amassed during the COVID-19 epidemic. Lenovo’s quarterly revenue declined 16% to $14.41 billion from the same period last year, marking the fifth consecutive quarter that the company has suffered a sales decline.
The outcome contrasted with the $14.45 billion average LSEG calculated from the projections of seven different analysts. Following a pandemic-induced boom for the electronics sector, Lenovo reported in May that its revenue had decreased by 14% for the year up to March. This was the company’s first annual dip since 2019.
The COVID-19 epidemic increased sales of both business and consumer gadgets worldwide. Despite this, income has been decreasing since the previous year due to supply beginning to exceed demand.
According to research by Canalys, there was a 7% decrease in the volume of personal computers shipped globally in the second quarter of 2023. Late in 2017, quarterly shipping decreases exceeded 30%; however, the pace of reduction has reduced considerably in recent quarters.
The Chairman of Lenovo, Yang Yuanqing, has stated that the company plans to launch its first “AI PC” in the second half of next year. An “AI PC” is a personal computer capable of utilizing artificial intelligence (AI) even when disconnected from the internet.
In an interview with Reuters, Yang stated, “We believe that this new category of PC will bring value to our users and customers and boost another round of sales in PCs.” “We believe that this new category of PC will bring value to our users and customers.”
The fact that AI PC users will not be required to transfer data to the cloud to utilize generative AI tools is a significant selling point for these computers. This will better preserve user privacy.
According to Yang, Lenovo is studying the potential impact of new restrictions imposed by the United States on the sale of artificial intelligence processors. These restrictions prevented the American chipmaker Nvidia (NVDA.O.) from exporting numerous cutting-edge AI chips to China.
“The new laws in the United States exclusively prohibit high-end GPUs (graphics processing units), especially for artificial intelligence training. However, this does not account for all the chips,” he stated. We have a very extensive and all-encompassing partnership with Nvidia in the areas of gaming PCs, workstations, and high-performance computing. I believe there will be no influence on this company’s operations.”
BEYOND THE PERSONAL COMPANY
In addition, Lenovo has been developing its non-PC industries, including smartphone manufacturing, server manufacturing, and information technology (IT) service provision, to boost its profit margins.
Lenovo’s digital solution service division saw its sales increase by 14% during the first half of its fiscal year, reaching $3.6 billion.
The company’s overall net income attributable to shareholders in the second fiscal quarter was $249 million, 60% less than the analysts’ expectation of $235 million.
Following the publication of the quarterly results report, Lenovo shares’ price decreased by 2.86% in early afternoon trading in Hong Kong compared to the decline of 1.42% in the benchmark index (.HSI).