A financial rebound for Lenovo, which recently lost its hold on the world’s No. 1 PC sales ranking, was short lived. The tech giant reports a $72 million loss for its most recent quarter after posting a profit for the first three months of this year.
Burdened by a slight decline in revenue year-over-year and increasing costs, Lenovo late Thursday night said it lost $72 million through the quarter ending June 30. Revenues slipped to $10.01 billion from $10.06 billion in 2016.
The news surprised analysts.
Bloomberg news said analysts it had polled expected a profit of nearly $33 million.
Analysts polled by Reuters had expected a $5.3 million profit.
Revenue was largely in line with expectations and did increase more than 4 percent quarter-to-quarter.
Last year, Lenovo reported a $173 million profit.
The tech giant faces challenges across its three major lines of business:
- Smart phone sales have plunged in its home market of China, more than offsetting gains made in Europe and Latin America. Revenue did climb more than 2 percent.
- PC shipments fell 6 percent and revenue was flat.
- And the data center business, which is based in the Triangle, continues to struggle with rising costs.
Lenovo Chief Operating Officer Gianfranco Lanci blamed rising costs for the deficit.
“Most of the component cost is stabilizing except memory … and the price is still going up,” Lanci said. And chip prices are expected to rise through the end of 2017, if not longer.
“The supply constraint of key components in the industry and cost increases will continue to bring short-term challenges,” Lenovo declared in a securities filing. “However, Lenovo now has a stronger organization with sharper customer focus and more compelling product portfolio,” it added.
Lenovo Chair and CEO Yang Yuanqing put a positive spin on the quarter.
“In the first quarter this fiscal year, we had stable performance as we executed our 3-wave strategy with commitment. We maintained our industry leading profitability in PC, built the foundation in mobile and data center, and further invested in ‘Device + Cloud’ and ‘Infrastructure + Cloud’ powered by Artificial Intelligence,” he said.
“We have made solid progress on every front of our strategy. Particularly MBG continued to improve, and is on track to breakeven by second half of this fiscal year. DCG gained good momentum as well. As the two new growth engines gain speed, we believe the sustainable results will soon follow.”
Lenovo operates one of its two global headquarters in Morrisville and employs several thousand people in North Carolina. Its other HQ is located in Beijing.
Lenovo shares trade on the Tokyo stock exchange.