Lenovo’s quarterly profit jumps despite trade war uncertainty

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Lenovo’s net profit more than doubled in the first fiscal quarter to beat analysts’ estimates, although the world’s largest PC maker warned that uncertainty lies ahead due to trade frictions between the US and China.

Why it matters: Lenovo’s business performance could suffer going forward due to President Trump’s threats of new tariffs on Chinese goods.

  • Trump said on August 1 that he would introduce a 10% tariff on $300 billion of Chinese imports, including tablets, as well as laptops and desktop computers, after recent talks with China failed to deliver a trade deal.
  • He added last week that tariffs on some goods including tablets and laptops would not come in until December, but those for desktops would start in September.

“There is a complexity of macro risks arising from ongoing trade negotiations, import tariff changes implemented by countries and challenges alongside geopolitical uncertainties.”

—Lenovo’s earnings statement for the first fiscal quarter for 2019-2020

Details: Net profit at Lenovo surged 111% to $162 million in the first fiscal quarter, beating analysts’ average estimate of $154 million, while revenue rose 5% to $12.5 billion.

  • Revenue from its personal computer businesses grew 12% to $9.6 billion, while smartphone sales dropped 9% in the quarter.
  • The company secured a record 25.1% share of the global PC market in the quarter, Lenovo cited industry data as saying.
  • The global PC market grew 1.5% in the second quarter after two quarters of decline, according to market research firm Gartner.
  • Its data center division saw a 17% decline in revenue, which the company attributed to sluggish demand in the industry.