China’s Lenovo shrugs off concerns that the global PC market is shrinking

Revenue of the world’s largest PC maker lenovo fell for the third straight quarter as global demand for personal computers continues to fall, but the company isn’t worried, says chief financial officer Wong Wai-Ming.

“We’re number one in PCs. Clearly, when the market really gets back to normal, we’ll definitely be growing,” Wong Wai-Ming, Lenovo’s chief financial officer, told CNBC.

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He added that the company is actually seeing more growth in other businesses, such as infrastructure solutions and services.

In its latest earnings report on Wednesday, Lenovo said it expects “the PC market to grow again” in the second half of 2023.

The company posted a decline in revenue in the January-March quarter. Revenue for the quarter was $12.63 billion, down 24% from a year ago and marked the third consecutive quarter of year-over-year decline.

“The fourth quarter of the fiscal year was the most challenging quarter of the year due to pressures from both the PC market and the global economy,” Lenovo said in the earnings report.

But the CFO is optimistic that its non-PC businesses—devices, infrastructure solutions, as well as solutions and services—can help diversify the business.

“In fact, our full-year revenue didn’t drop that much because the other two business groups have been driving significant growth in part from the infrastructure business. The margin has also been mitigated or offset by our significant growth in our services business. Wong said.

Lenovo’s non-PC business grew 7% and now accounted for nearly 40% of total revenue for the full year through March. The other 60% of revenue still comes from the PC business.

“The revenue mix of our non-PC businesses increased by nearly 40%. Our clear strategy is working and our operation is resilient, even in the face of global uncertainties,” said Yuanqing Yang, Lenovo Group Chairman and CEO during the earnings call. . “In the future, we will continue to invest in [research and development] to capture the next wave of growth opportunities, so we are well prepared for the future.”

PC makers benefited from a pandemic-spurred boom in which consumers and businesses snapped up laptops, tablets and notebooks to transition from office to remote work. But when workers returned to the office, PC shipments fell.

Global desktop and laptop shipments contracted about 30% to 56.9 million units in the first quarter of 2023 compared with a year ago, according to IDC data.

Lenovo’s device revenue decreased 33% year-over-year in the first quarter.

But Wong is optimistic that artificial intelligence will boost the company’s device business. The acceleration of digitization, AI and chatbots “really require devices” to take advantage of them, Wong told CNBC.

“Eventually, we’ll have three big business growths that will drive revenue instead of what we’ve had in the past: just having PC as our main driver. Eventually, we’ll have three business groups that will drive profitability,” Wong said.

Lenovo shares fell 1.8% in Thursday morning trading.