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Lenovo in profit slump

August 13, 2015

Chinese computer giant Lenovo has reported a steep drop in profits for the first quarter in its fiscal year starting in April. The company said job cuts were unavoidable and so was an overhaul of its mobile business.

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China Lenovo Geschäft in Schanghai
Image: picture-alliance/dpa/Jing Wei

Beijing-based Lenovo said Thursday it would have to cut 3,200 jobs globally from its non-manufacturing workforce as it struggled to generate more growth. Net profit fell by 51 percent in the three months to June, totaling $105 million (94 million euros).

The world's biggest PC maker announced it would seek to slash costs by 1.35 billion annually to become more efficient.

Lenovo said it had suffered from a decline in global demand for personal computers. The PC segment accounts for roughly a third of the company's revenue despite recent efforts to diversify into other sectors.

Disappointed investors

It's been one of the firm's priorities to gain a bigger foothold in the smartphone market, but progress has been slow.

Moving towards mobile has hit a snag as demand for Lenovo phones in China has weakened in the face of increased competition from other domestic and affordable brands.

Worldwide, Lenovo only has a 0.5-percent share in the smartphone market, prompting it to invest $600 million in the coming months to completely restructure its mobile business.

The company's shares - traded in Hong Kong - slipped almost 7 percent in morning trading as investors had misgivings about speedy progress.

hg/ng (AFP, Reuters)