BEIJING: China’s Lenovo Group, the world’s biggest PC maker, yesterday reported its first loss in six years, hit by exceptional acquisition and restructuring costs as well as weak sales for its smartphones business.
With its shares at a near five-year low, the Hong Kong-listed company is also looking at the possibility of a listing back in China’s mainland, adding to the growing number of Chinese companies heading home as restrictions on capital flows to and from the country create strong demand for locally listed stocks.
Mainland firms have long been attracted to Hong Kong’s standing as a global financial hub, stable legal regime and large pool of investors, but the downside is that share prices can be higher in the mainland.
“We have been looking for ways to raise value for shareholders. Listing in another market is an option,” Lenovo’s President and Chief Financial Officer Wong Wai Ming said, adding that the mainland is a good market.
Lenovo booked a net loss of US$128 million for the year ended on March 31, which compared with a profit of US$829 million the previous year and analysts’ expectations of a loss of US$123.6 million, according to Thomson Reuters.
Revenue fell 3 percent to US$44.9 billion, although at constant currency exchange rates it rose 3 percent. In the fourth-quarter alone, revenue fell 19 percent as Lenovo sought to shift its reliance on the slowing PC industry toward smartphones and servers.
It said profits were pulled down by costs incurred following its acquisitions in 2014 of the Motorola phones business from Google and the low-end server arm of IBM.
It also booked a charge of US$923 million for costs related to restructuring the businesses and clearing out smartphone inventories.
“These results show integration efforts did not meet expectations,” Chief Executive Yang Yuanqing said in a Hong Kong stock exchange statement, pointing to an 85 percent decline in phone shipments in China.
However, when asked at a news conference, Yang said the company had never regretted acquiring Motorola.
“Otherwise, we would not have had the global footprint we see today,” he said.
Cuts in handset subsidies by local network providers and sluggish demand in emerging markets contributed to Lenovo’s global smartphone shipments falling 32 percent year on year to 11.5 million in the first three months of 2016, according to data from researcher TrendForce.
Meanwhile shipments of PCs fell 7 percent in the last quarter, compared with a 9.6 percent drop in the overall market, said researcher Gartner.
