Lenovo's chief executive has claimed that currency fluctuations, low inventory ahead of Windows 10, and global economics have contributed to its Q1 being "perhaps the toughest quarter, especially for PCs, since the 2008 and 2009 global financial crisis".
In its Q1 results, Lenovo boss Yang Yuanqing said that despite these problems, the company's performance was "solid".
For the three months to 30 June, profit for the period rose 65 per cent annually to $168m (£128m), on revenue which over the same period fell six per cent to $10.1bn.
On an earnings call, Yang (pictured) said: "The PC market declined significantly, and faster than expected, because of lower inventories ahead of the Windows 10 launch and currency depreciation. Currency fluctuations and broad macroeconomic issues in Brazil and Latin America constrained the growth and impacted the profitability of Motorola because of the higher concentration of business there. In China, the smartphone market shifted... and the competition became more intensified.
"In fact, it was perhaps the toughest quarter, especially for PCs, since the 2008 and 2009 global financial crisis. But Lenovo continues to deliver solid financial performance despite these challenges.
"Our PC business reached record worldwide share while improving margins year on year, although revenue and profit declined with the market. In tablets, we outgrew the market by 12 points and narrowed the gap with the top two. In the enterprise business, Lenovo's ThinkServer business grew faster, with revenue up 41 per cent year on year.
"Although these are solid results in a tough environment, we realised we had to act quickly, proactively and decisively to meet market challenges. Our foundation is solid but we must react to the faster-than-expected market decline. We will keep raising the bar of efficiency and continue to deliver margin improvement."
The EMEA region accounted for a quarter of Lenovo's total revenue in Q1. PC unit shipments in the region fell seven per cent year on year, against a market decline of five per cent over the same period. Currency and macroeconomic issues were to blame.
On the call, Lenovo's COO Gianfranco Lanci elaborated on the performance in EMEA.
"The slowdown [in PCs] is mainly coming from some geographic areas – mainly EMEA, where we have seen the market slowing down by 20 per cent last quarter," he said. "The situation in EMEA is probably a little bit worse than expected on channel inventory. We are taking action. We're seeing strong momentum in the US where we continue to gain share. In Q1 we were also very cautious with inventory due to Windows 10. We didn't push in terms of loading the channel."
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