Revenues for the world’s largest PC-maker Lenovo fell for a third consecutive quarter as global demand for personal computers continue to slump, but the company is not worried, says CFO Wong Wai-Ming.
“We are number one in PC. Clearly, when the market actually returns back to more normal, we will definitely be growing,” Wong Wai-Ming, CFO of Lenovo, told CNBC.
He added that the company is actually seeing higher growth in other businesses such as infrastructure solutions and services.
In its latest earnings report on Wednesday, Lenovo said it expects “the PC market will return to growth” in the second half 2023.
The company posted a revenue decline in the January to March quarter. Revenue in the quarter amounted to $12.63 billion, down 24% from a year ago and marked the third consecutive quarter of year-on-year decline.
“Fiscal year Q4 was the most challenging quarter of the year given pressures from both the PC market and the global economy,” said Lenovo in the earnings report.
But the CFO is optimistic that its non-PC businesses — devices, infrastructure solutions as well as solutions & services — can help diversify the business.
“Our revenue on a full year basis in fact didn’t actually drop that much because the other two business groups have been driving significant growth in part by the infrastructure business. The margin has also been mitigated or compensated by our significant growth in our services business,” said Wong.
Lenovo’s non-PC businesses grew 7% and now consist of nearly 40% of total revenue for the full year through March. The other 60% of revenue still comes from the PC business.
“Our non-PC businesses’ revenue mix increased to nearly 40%. Our clear strategy is working, and our operation is resilient, even in the face of global uncertainties,” said Yuanqing Yang, chairman and CEO of Lenovo Group during the earnings call. “Going forward, 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 were a beneficiary of a pandemic-led boom that saw consumers and firms snap up laptops, tablets and notebooks to transition from working in office to remote work. But as workers returned to the office, PC shipments fell.
Worldwide shipments of desktops and laptops contracted about 30% to 56.9 million units in the first quarter of 2023 as compared to a year ago, according to IDC data.
Lenovo’s devices revenue declined 33% year-to-year in the first quarter.
But Wong is optimistic about artificial intelligence driving the firm’s devices business. The acceleration of digitization, AI and chatbots “actually require devices” to leverage them, Wong told CNBC.
“Eventually we will have three major business growth driving the revenue rather than what we had in the past — just having PC as our primary driver. We will over time have three business groups driving profitability,” said Wong.
Lenovo’s shares were down 1.8% in Thursday morning trade.