Lenovo Group Ltd, the world’s fourth- largest personal-computer maker, posted its first quarterly loss in almost three years and said Chief Executive Officer William Amelio resigned as sales in the US and China plunged.
Amelio, 51, will be replaced by Chairman Yang Yuanqing, while founder Liu Chuanzhi returns as chairman starting today, the Chinese company said in a statement on Thursday. The fiscal third- quarter loss of $96.7 million was triple the median of four analyst estimates compiled by Bloomberg.
The maker of the Thinkpad laptop posted a 20 per cent decline in sales, dropping the company further behind Hewlett-Packard Co and Acer Inc as demand from corporate clients shrank. The departure of Amelio, a former Dell Inc executive, returns Lenovo’s management to Chinese control and signals a renewed focus on its home market.
“All tech companies are under pressure, especially Lenovo, as they’ve spent a lot on building distribution in the US and Europe,” said Renault Kam, a Hong Kong-based senior portfolio manager at Atlantis Investment Management, which oversees $2 billion. “It’s in deep water. They’re going to need a strong CEO with a clear strategy.”
Lenovo fell 2.7 per cent to close at HK$1.46 in Hong Kong, extending its drop to 31 per cent this year. The stock tumbled 70 percent last year, worse than the benchmark Hang Seng Index’s 48 per cent decline.
Greater China Sales
Sales in China, Taiwan and Hong Kong fell 6.5 per cent in the last quarter from a year earlier, while revenue in the Americas region, the company’s biggest market outside of China, dropped 22 per cent, Lenovo said.
“China remains our most important market,” Amelio said on a conference call today. “While the China PC market is now growing at a slower rate than the rest of world, we know this market will recover and return to robust growth.”
China was the only one of Lenovo’s four regions to post an operating profit, falling to $97 million for the period from $122 million a year earlier. “The next several quarters will remain very challenging for Lenovo,” the company said. Lenovo plans to “adjust its business model” to tap demand for lower-cost products, it said.
Bigger Rivals
Hewlett-Packard, Dell and Acer have widened their lead over Lenovo as the Chinese company trails its bigger rivals on cheaper products aimed at consumers, Bank of America Corp. analyst Daniel Kim wrote in a January 9 report.
“Regaining profitability will be painful given the poor macroeconomic environment,” Jenny Lai, who rates the stock “sell” at CLSA Asia-Pacific Markets in Taipei, wrote in a Feb. 3 report. “The most worrisome trend for Lenovo is its market share loss in the U.S. and Western Europe.”
