China’s Lenovo revenue falls for third consecutive quarter as PC demand slumps

China’s Lenovo Group Ltd on Wednesday reported a 24% fall in revenue for the January-March quarter, meeting market expectations, as demand for personal computers (PCs) continued to slump.

The world’s largest PC maker said fourth-quarter revenue was $12.63 billion, down 24% from the same period a year earlier and marking the third consecutive quarter of on-year decline.

The result compared with the $12.74 billion average of eight analyst estimates compiled by Refinitiv.

For the full year through March, revenue shrank 14%, marking the first annual decline since 2019.

The outbreak of COVID-19 gave a huge boost to electronics sales as consumers and companies alike stocked up on equipment or upgraded existing gear to accommodate a shift to remote work.

However, revenue started contracting last year as demand began to fall. For the previous quarter, Lenovo reported a decline in revenue of 24%, its steepest in 14 years.

Global PC shipments across the industry declined 29% in January-March to 56.9 million units, fewer than the same period in pre-pandemic 2018 and 2019, showed data from researcher IDC.

In an interview, Lenovo Chief Executive Officer Yang Yuanqing said that he expects PC demand to recover in the second half of the year.

“By the end of this quarter or early next quarter, the inventory digestion will come to an end so that the activation number and the shipment number will be more consistent,” he said.

China’s cyberspace regulator said last week that Micron, the biggest U.S. memory chipmaker, had failed its network security review and that it would block operators of key infrastructure from buying from the company.

While Lenovo sources various components from Micron, Yang said Beijing’s regulatory actions at Micron would not have any big impact on the company.

“We have a pretty diversified supply chain. Leveraging that, we will still be able to meet our customers’ requirements in all our markets,” he said.

“As a global company, we wish geopolitical tension can be mitigated (and the world) to be more peaceful,” he added.

To improve profit margins, Lenovo has been expanding non-PC businesses, such as in smartphones, servers and information technology (IT) services.

For the full year through March, its non-PC businesses grew 7% and now make up about 40% of total revenue.

Overall net income attributable to shareholders in January-March fell 72% to $114 million versus analysts’ $212.49 million estimate.

The price of Lenovo shares fell 3.7% in morning trade before the earnings results were released, compared with a 0.94% decline in the benchmark index.