China’s Lenovo posts quarterly profit far short of estimates, shares slide

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By Che Pan and Brenda Goh

BEIJING (Reuters) -China’s Lenovo, the world’s largest personal computer manufacturer, said fourth-quarter profit plunged 64% – a result that was far worse than expected and one that sent its shares sharply lower.

The profit slide was mostly due to a fair value loss on warrants but the company was also hurt by the U.S. President Donald Trump’s decision in March to double fentanyl-related tariffs on all Chinese imports.

“The 20% tariffs announced in March were implemented suddenly and left us no time to prepare. It had a significant impact on our numbers in the last quarter – it’s not a small number,” Lenovo’s CEO Yang Yuanqing said in conference call.

Lenovo’s shares tumbled 5.4%, underperforming a 1.3% fall in the Hang Seng index.

While the U.S. and China have rolled back most of their tariffs levied since April, the 20% tariff remains.

Yang told Reuters in an interview that if tariffs impacted costs, the company would raise prices. Lenovo has 30 manufacturing facilities in more than 10 countries, and that its diversified manufacturing bases can help it navigate U.S. tariffs, he added.

Net profit for Lenovo, which also manufactures smartphones and offers cloud computing solutions, came in at $90 million, well short of an LSEG consensus estimate of $225.8 million.

But overall revenue for the January-March quarter climbed 23% from the same period a year earlier, ahead of analysts’ expectations of $15.6 billion.

The company’s infrastructure solutions group, which includes servers, did particularly well, posting a 64% jump in revenue. Its solutions and services group, which offers cloud-based software for enterprise clients, saw revenue surge 22%.

(Reporting by Che Pan and Brenda Goh; Editing by Jamie Freed and Edwina Gibbs)