Sluggish PC market sees Lenovo post first-quarter loss

Chinese personal computer maker, Lenovo Group, has posted a first-quarter loss, citing higher costs and slower growth in the personal computer market, and said the outlook was challenging due to supply constraints.

Lenovo, which lost its position as the world's largest PC maker to HP Inc. in the quarter through June, lost US$72 million compared with a profit of US$173 million for the same period last year.

It was the company's first quarterly loss since September 2015 and lagged forecasts for a profit of US$5.29 million, according to the average of eight analyst estimates in a Thomson Reuters poll.

"Looking forward, the supply constraint of key components in the industry and cost increases will continue to bring short-term challenges to the group's business environment," Yang Yuanqing, chairman and CEO, said in a statement.

"Market conditions remain challenging in the short term, notably the component supply shortage and cost hike are expected to continue pressuring business operations."

Revenue was flat at US$10.01 billion, in line with an estimate of US$10 billion.

Lenovo has suffered from a global decline in PC demand as consumers turn to smartphones and tablets, particularly in its home market of China. Gartner forecast the global PC market will shrink by three per cent in volume in 2017.

Lenovo's PC shipments declined 6 per cent, after two quarters of growth. That compared with a three per cent drop for the industry, Lenovo said in its filing to the Hong Kong Stock Exchange. Its market share dropped 0.6 per centage points year-on-year to 20.4 per cent.

Shortages of memory chips added to costs and dragged down margins, it said.

Revenue from the PC and smart devices business, contributing almost 70 per cent of the total, increased 0.2 per cent to $7.01 billion in the quarter.

The operating loss from the group's struggling mobile business narrowed to US$129 million, from a loss of US$163 million a year ago. It turned in revenue of US$1.75 billion on a 1 pct rise in smartphone shipments.

Its data center business group recorded an operational loss of US$114 million, versus a loss of US$31 million a year ago.

(Reporting by Sijia Jiang, Editing by Anne Marie Roantree and Stephen Coates)