Lenovo's Global PC Shipments Fall 1 Percent, Slower Than Market Decline

HIGHLIGHTS

  • Revenue from PC and smart device business fell 2 percent to $30.1 billion
  • Lenovo blamed a 4 percent drop in revenue on difficult macro environment
  • Lenovo said its worldwide PC market share rose to 21.4 percent

China’s Lenovo Group, the world’s largest personal computer maker, said its global PC unit shipments fell 1 percent in the year ending in March, against a market decline of 3 percent, as consumer demand continued its downward trend.

Revenue from its personal computer and smart device business, which accounts 70 percent of total revenue, fell 2 percent to $30.1 billion (roughly Rs. 1,94,226 crores).

Lenovo blamed a 4 percent drop in total revenue to $43 billion (roughly Rs. 2,77,450 crores) on difficult macro environment, its own business transformation efforts, and component supply constraints in the second half of the year.

Lenovo's Global PC Shipments Fall 1 Percent, Slower Than Market Decline

For the full year ended March, Lenovo posted a profit of $535 million (roughly Rs. 3,451 crores), reversing a loss of $128 million a year prior. The result compared with the $569 million average of 24 estimates.

According to market intelligence firm Gartner, worldwide PC shipments totalled 62.2 million units in the first quarter of 2017, the 10th consecutive quarterly decline and the first time since 2007 for the figure to drop below 63 million.

Lenovo said its worldwide PC market share for the full year rose 0.4 percentage point to a record high of 21.4 percent, though that is down from 22.4 percent in the previous quarter.

“Despite market conditions that will remain challenging in the short term, the Group exited the year with stronger organization allowing for sharper customer focus and more compelling product portfolio across all our business,” Chairman and Chief Executive Officer Yang Yuanqing said in a filing.

PC competition took a step up this week when China’s largest mobile phone maker, Huawei, said it would enter the market for premium consumer models.

 

Lenovo also competes with Huawei in mobile, which accounts for 18 percent of its revenue. The business’ loss widened to $566 million last year from $469 million a year prior on a 10 percent drop in revenue to $7.7 billion, though Lenovo said the business had strong growth in markets outside China, especially Latin America and Western Europe.

The company’s smaller data centre business, which includes servers and enterprise services, incurred a loss of $343 million, with revenue down 11 percent to $4.07 billion.

Yang said Lenovo’s core PC business remained solid, transformation for mobile businesses is on track, while it is accelerating efforts to improve its data centre business.

He said last week Lenovo will reorganise domestic operations in response to the changing PC industry. Lenovo China will split into two divisions: one focused on consumer PCs and smart devices, and the other on data centres.

Lenovo’s profit for the three months through March dropped 41 percent to $107 million. That beat the $93.8 million average of 11 analyst estimates in a Thomson Reuters poll.

Revenue rose 5 percent to $9.58 billion, against an estimate of $9.6 billion.

More people are buying diamonds for themselves as global sales bounce back

Shoppers are increasingly treating themselves to diamond jewellery, rather than buying it for others – helping push the global market back into growth.

Worldwide diamond sales hit $80bn (£62bn) in 2016, according to industry leader De Beers, reversing a dip the year before when demand from China and India slumped.

Global sales were bolstered by rising demand in the US, the world’s biggest diamond market, which accounts for 50pc of all polished stones.

Stephen Lussier, marketing director of De Beers, said that one-third of all sales in the US were now down to “self-purchase”, up from around a quarter before 2008.

“Gift-giving is still the foundation of sales, but there is a trend of economically empowered women buying diamond jewellery for themselves,” Mr Lussier said.

This is split across younger, “millennial” shoppers – those born after 1980 – and married women, according to De Beers.

jewellers
US diamond retail sales recorded their fifth straight year of growth

The increasing popularity of designer jewellery, such as “stackable” diamond rings, was also driving self-purchase, Mr Lussier added. “It’s very hard for men to buy design-oriented jewellery because we get it wrong. We can buy the classical cuts but women are more particular about designer jewellery.”

Diamond jewellery sales in India slumped 8.8pc last year after the local market was hit by a six-week jewellers’ strike and a surprise demonisation programme launched by the government.

The removal of high-denomination banknotes in a crackdown on the black market rocked the local diamond industry, which is largely cash driven. Although India only accounts for 6pc of global retail sales, it is responsible for around 90pc of the world’s diamond cutting and polishing.

Mr Lussier said the world diamond market was looking “pretty steady” this year, with India bouncing back more quickly than expected, and sales rising in China.

Global platinum supply likely to fall 2% this year

Overall platinum supply is projected to fall by two per cent year-on-year to 7,330 kilo ounces (koz) in 2017, with both primary and secondary supply expected to decline.

According to the World Platinum Investment Council’s (WPIC)’s publication Platinum Quarterly for the March quarter of 2017, the global demand for platinum is projected six per cent lower (at 7,795 koz) than last year’s demand  but the demand-supply gap has fallen 82 per cent, while above ground stock is down three per cent. India’s demand for platinum in the jewellery sector is rising. WPIC said the demand was highest in 2016 with 11.5 per cent increase to 245 koz. Paul Wilson, chief executive officer, WPIC, said, “India’s jewellery demand is expected to grow even faster in 2017.”

Automotive demands, where the white strong precious metal is used as an auto catalyst in converters to reduce carbon emission, fell in 2016 by six per cent to 165 koz. India’s demand for the metal is five to six per cent of the total global demand, and a chunk of it comes from the jewellery and automobile sectors.  The metal is used in laboratory instruments and also has some other industrial uses.

“The full-year forecast for automotive platinum global demand is 3,405 koz, down from 3,435 koz in 2016. Despite the loss of diesel share in smaller cars in Western Europe and India, diesel is expected to retain much of the medium and larger car market, at least in the short to medium term,” the report said.

About auto sector demand, the council said, “In India, there are signs that automakers are stopping production of the diesel versions of some of their smaller cars, as diesel loses ground to gasoline. However, with implementation of the GST, this may boost consumer confidence and drive up sales, or the confusion may lead consumers to postpone purchases beyond 2017. These downside risks are likely to affect small cars more than larger ones, so the diesel impact is lessened.”

So far as investment in platinum in India is concerned, the market is yet to develop. India may now see some traction because WPIC has tied up with Muthoot Exim, the precious metals division of the Muthoot Pappachan Group, to launch India’s first platinum deity products.

Paul said, “Today platinum investment is an underexploited market in India, but based on the recent history of growth in jewellery and opportunities we are developing with partners in India, the platinum investment market in India has great potential.”

Global platinum supply likely to fall 2% this year