Lenovo Group has reported a 66% fall in net income with the Intelligent Devices Group that sells PC’s tablets, smartphones and other consumer devices reporting a 28% revenue fall, revenue in Asia Pacific overall revenues were down 17%

Management also reported that the division came under pricing pressure with margins falling 6.3%.

Global PC shipments declined 13.4% this year during the second quarter of 2023, according to preliminary results from IDC.

Overall revenues also declined to US$12.9 billion which is not what analysts were expecting.

Shares fell as much as 6.1%, this afternoon.

their biggest intraday drop in nearly three months, after the results were released.

On a bright note, Lenovo who also own Motorola held onto the #1 PC spot ahead of HP despite shipments shrinking 18.4%, according to IDC.

Also tipped to contribute toto future growth is a demand surge for AI servers. The company sees the rapid development of AI applications generating numerous new opportunities, it said in its statement.

The company said the unusual action of clearing inventory weakened profitability for its main business unit.

A big contributor to Lenovo’s fall in revenues was due to problems in the Chinese market with consumers are increasingly reluctant to buy PC’s smartphones, and other devices as the world’s second-largest economy slides into deflation.

 

“The intelligent devices group, which sells PC and smartphones and is the biggest source of revenue, is poised to be the main drag due to sluggish consumer demand and ongoing inventory digestion,” Bloomberg Intelligence analyst Steven Tseng wrote in a memo shortly after the data was released.

Management claim that they see a recovery coming for the business with AI set to drive demand going forward.

“AI’s higher requirements of computing power and new AI functions will support demand for Lenovo’s end devices,” a Goldman analysts said.

“In overseas market, Lenovo is well positioned with global leading clients and for overall servers’ business, we expect Lenovo to grow on market share gain, product mix upgrade and product lines expansion.” they claimed.