HONG KONG: Chinese technology giant Lenovo Thursday reported higher profits in the first quarter thanks to cost cutting, but sales of PCs and smartphones continued to struggle. The company’s share price rose 3.55 percent to HK$5.54 in morning trade after it announced net profit was up 64 percent year on year at $173 million. However, revenue sank six percent to $10.1 billion due to slowing sales in its PC and fledgling mobile handset businesses.
The Beijing-based company, which has traditionally manufactured computers, has been trying to broaden its smartphone business as the market for personal computers fizzles. But it has struggled to keep pace with Apple and Android rivals. Revenues from its PC and smart device business, which includes tablet computers, dropped seven percent to $6.99 billion. Its mobile business also fell six percent to $1.71 billion and the division reported an operational loss of $163 million. However, the company said its PC business was “better than expected” citing a global market decline of four percent, while its smartphone business “stabilised”.
It protected profit margins by reducing operating expenses by 17 percent year-on-year to $1.29 billion in the first quarter. “Lenovo managed to deliver profit growth from its businesses, driven by efficiency improvements,” Yang Yuanqing, the firm’s chairman, said in a statement. The firm announced plans to slash costs by $1.35 billion and cut 3,200 staff from its non-manufacturing workforce in August last year. The company purchased IBM’s low-end server business in 2014 as part of a strategy to expand business beyond PCs.
