Lenovo in the red after sales slump

Core market: about half of Lenovo's sales come from its native China

PC vendor Lenovo had to swallow a $16m (£9.4m) net loss during its first fiscal quarter after revenue dropped 17.9 per cent year on year.

For the three months to the end of June, the Chinese firm banked revenue of $3.5bn, down almost a fifth on the same period last year. Net loss stood at $16m, compared to a profit of $110.5m last year. However, this quarter's loss will be significantly easier to stomach than the $264m the firm lost in Q4.

Despite the losses, Lenovo claimed its global PC shipments spiked 1.1 per cent annually. Today's are the company's first results published since it restructured the business in March into two units focusing on mature and emerging markets respectively.

Two new product groups were also formed: Think, which addresses the enterprise and SME space, and Idea, which targets small businesses and consumers. Lenovo claims the move will ultimately save it an annual $300m, but in the first quarter the firm incurred a restructuring cost of $3m.

Lenovo chief executive Yang Yuanqing claimed the reshuffle was already paying dividends. “The decisive actions we took last quarter to align our business with changing market conditions and extend our transactional business model globally have started to pay off," he said.

"As a result, Lenovo achieved its highest quarterly global market share since the acquisition of IBM’s PC division. With the global economic environment still unstable, we will continue to extend our leadership in China, strive to restore profitability in mature markets, and also seize opportunities in emerging markets and the transactional space.

"Furthermore, we will continue to optimise our cost structure and diligently implement our strategies, designed to drive long-term profit growth and development of Lenovo.”

Lenovo posted first-quarter sales in China of $1.7bn, representing 48 per cent of the worldwide total. It increased PC shipments in the country by 15 per cent and grew its market share by three tenths of a point to 26.3 per cent. It remains China's top PC vendor.

In the rest of its emerging markets region, revenue stood at $474m, 14 per cent of the overall amount. PC shipments in the region were down six per cent annually and Lenovo claimed it had been hurt by weak consumer demand.

The emerging markets region covers Africa, Asia Pacific, China, eastern Europe, Hong Kong, India, Korea, the Middle East, Pakistan, Russia, Taiwan and Turkey. A quasi-autonomous Latin American arm is also included.

Lenovo's mature markets operations include Australia, New Zealand, Canada, the US, Israel, Japan, western Europe and other global accounts. Revenue from the region in Q1 was $1.3bn, 38 per cent of the total.

The vendor claimed softness in commercial sales across western Europe and the US fuelled a 17 per cent annual drop in shipments in the region. But the company claimed reduced losses in North America, Australia, New Zealand and Japan helped it towards a return to profitability.

Lenovo chairman Liu Chuanzhi claimed times remained tough and his firm still faced a hard road ahead. “There was little doubt that this year was going to be a challenge to our industry, but we are encouraged that some of the recent actions we have taken are helping our business get off to a hopeful start during the first quarter,” he said.

“Our expectations for growing our business profitably worldwide remain solidly in place, and, while there is a tremendous amount of work yet to be done to get our business to where it needs to be, the changes we are making will help strengthen our ability to go after new markets as global economic conditions improve.”