Lenovo posts worst revenue fall in 14 years

China’s Lenovo reported a 24% revenue decline for the third quarter, its largest revenue fall in 14 years as global demand for electronics slumped, and said it would look to cut spending and make workforce adjustments.

The world’s largest maker of personal computers (PCs) said on Friday that total revenue during the October-December quarter was $15.3 billion, down 24% from the same quarter a year earlier. The results trailed an average Refinitiv estimate of $16.39 billion drawn from seven analysts.

The outbreak of COVID-19 in 2020 provided a huge boost in electronic sales for Lenovo and its peers worldwide as many people opted to work remotely and replaced or upgraded their equipment.

However, demand has begun to fall and Lenovo’s revenue started contracting in the July-September quarter last year.

Lenovo Chief Executive Officer Yang Yuanqing told an analyst call after its earnings that the entire PC and mobile market experienced a “severe downturn” in the last quarter, and the company was looking to reduce expenses and improve efficiency.

Lenovo is aiming to reduce its run rate operational expenses by approximately $150 million to achieve a medium-term goal of doubling net margin, its chief financial officer, Wong Wai Ming, added.

“This includes overall reduction in operational spending as well as workforce adjustments where necessary and appropriate.” he said.

Wong did not elaborate on whether this would involve layoffs.

Rivals Dell Technologies and HP have announced they will cut staff. Dell said it will cut about 6,650 jobs, or 5% of its global workforce, while HP expects to cut up to 6,000 jobs by the end of fiscal 2025, or about 12% of its global workforce.

Lenovo’s net income attributable to shareholders for the October-December quarter plunged 32% to $437 million. Lenovo shares in Hong Kong slid 3.14% on Friday.

IT research firm Gartner said last month that shipments of PCs and mobile phones were likely to fall for the second consecutive year in 2023. PC shipments are likely to slide 6.8% this year after falling 16% in 2022, Gartner said.

Lenovo said that market was in the process of digesting excessive inventory, which may need one or two more quarters. But Yuan said device activation data showed that real demand was not as bad as it may appear.

“From the second half of the year, you will see the PC market resume growth,” he said.