Lenovo, the world’s largest computer manufacturer, has disclosed its first earnings decline in nearly three years and issued a job-cut warning as the market for computers and other smart gadgets remained poor.
For the first time since 2020, net profits in the December quarter decreased, falling 32% year over year to $437 million.
For the second consecutive quarter, revenues fell, falling 24% to $15.3 billion.
The amount fell far short of the $16.4 billion forecast by analysts surveyed by Refinitiv.
On hearing the news, Lenovo’s shares fell more than 3% in Hong Kong.
During a conference call to discuss earnings, Yang Yuanqing, the CEO of Lenovo, stated that “the smart devices market is in its worst period.”
“The smart devices market is in its worst period,” said Lenovo’s chief executive Yang Yuanqing on an earnings call.
He noted that in order to reduce costs, the corporation would need to modify its staff and hire in industries with strong development prospects.
Chief Financial Officer Wong Wai Ming estimated that in order to increase the company’s net margin, operational costs would need to be reduced by around $150 million.
Lenovo is a leading indicator for a sector that has lost ground during the peak years of the epidemic when remote working sparked a sharp increase in consumer goods sales.
The major nations are currently experiencing inflationary pressures and a recession, which has led to a decline in worldwide PC demand as consumers and businesses become more frugal with their expenditures.
Yang asserted that he thought the market was also still assimilating inventory from the pandemic phase.
“We think the market demand is not as bad as many expected,” he said, predicting the PC market would resume growth from the second half of the year.
The fourth quarter of 2022 saw a 28% yearly decline in global PC shipment volume to 67.2 million units, according to the IDC research organization.
However, rival Gartner forecast that this year’s decline in PC and mobile phone shipments would be milder. According to the report, PC shipments were predicted to fall 6.8% this year and by 16% in 2022.
According to research firm Canalys, if tablets were added to notebooks and desktop PCs, Lenovo lost its top spot to Apple in the fourth quarter, even though IDC stated that it continued to lead HP and Dell in its core PC market.
Lenovo shipped 17.9 million units in total at that time, a 32% decrease from the previous year.