Despite a slew of bad news for the PC market, which set a record recently for the longest duration of decline in its history after five consecutive quarters of falling shipments according to Gartner, Chinese firm Lenovo’s latest financials show that there is still room for making money through selling PCs.
Looking at Lenovo’s fiscal Q1 results, the one huge milestone people will zoom in on is that the company’s combined sale units of smartphones and tablets surpassed PCs for the first time ever during the quarter and became the world’s fourth largest smartphone supplier.
However, look closely and you will see that it is laptops and PCs, not tablets and smartphones, that account for the largest slice of Lenovo’s $8.8 billion quarterly revenue.
It is true that even Lenovo has experienced a slight dip in PC revenue — it shipped 12.6 million units of its desktop PCs and consolidated sales decreased 2.8 percent year-on-year in the first fiscal quarter — but at $2.5 billion, Lenovo’s PC sales still accounted for a healthy 28 percent of its total revenue.
Comparatively, despite the consolidated sales of Lenovo’s smartphones and tablets increasing 105 percent year-on-year in the first quarter — the amount of revenue from the business stood at $1.2 billion, making up 14 percent of the company’s total revenue.
The crux of this is simple: the price per PC unit is much higher than that of either a smartphone or a tablet.
This shows that if Lenovo plays its cards right, even while it experiences flat PC shipment growth or a slight dip in shipments, the PC business can still contribute a meaningful amount of money to its overall business — a bright spot amid all the negative news for PCs recently.
What is notable is that Lenovo’s PC shipments in Europe/Middle East/Africa (EMEA) increased 18 percent in the first fiscal quarter year-over-year and chalked up revenue of $1.9 billion, or 21 percent of Lenovo’s worldwide revenue. This is despite a recent report from independent analyst firm Canalys that noted PC shipment declines in EMEA of 3 percent year-on-year in the April-June period, the first decline after two successive quarters of double-digit growth.
Lenovo also bucked the trend in laptops. Even though bad news has been coming from the laptop side as well, with Canalys saying that laptop shipments worldwide fell 13.9 percent in the April-June quarter, Lenovo’s laptop business recorded consolidated sales of $4.5 billion, an increase of 4.7 percent year-over-year.
Lenovo is a prime case study in how to swoop in on a less-favored market and earn money out of it — even though the company’s combined sales of smartphones and tablets surpassed PCs for the first time ever during the quarter, the fact that it has stated it is still committed to its PC and laptop business shows a sharp business acumen on the company’s part.
Is there fighting space left in the PC and laptop industry? It seems that the answer is yes, and Lenovo seems determined to make the most out of it.
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