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The Chinese company Lenovo suffered a loss in the last quarter

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The Chinese company Lenovo suffered a loss in the last quarter
August 18
09:00 2017

One of the leaders in the field of the computer production – the company Lenovo Group – has reported a loss for the last fiscal quarter. This is the first loss-making quarter in the last one and a half years. The reason for such depressing financial results is the continued price rise for the PC memory.

The company’s press release reports that over the past fiscal quarter the loss has been equal to $ 72 million. Last year, the company showed a profit of $ 173 million for the same period.
The company’s revenue hasn’t grown too. It amounted to $ 10.01 billion. This is $ 60 million less than last year.

The head of Lenovo Group Yang Yuanqing shared with the public the essence of difficulties. He explained that the prices for the memory and other components had been growing for more than a year, which negatively affected the profitability of not only the Chinese giant, but the entire industry as a whole. He also specified that it was not possible to compensate the price increase of components by raising the cost of products, since the company was under long-term contracts (with fixed prices) to customers.

MarketWatch explains the rise in memory prices by the fact that recently there has been a noticeable increase in the demand for these components.
Another reason for the disappointing financial statements is a decrease in demand for smartphones and a decline in the sales growth of personal computers.

For the last fiscal quarter of this year, Lenovo’s share in the PC sales has totalled 19.9%, which is 0.9% less than in the previous year. At present, the American company HP Inc. is number one in PC sales.

In the smartphone sector, Lenovo’s market share is 3.2%, so the Chinese hardly have a chance to catch up with the Group of 2 – Apple Inc. and Samsung.
On the results of poor quarterly reporting, Lenovo shares have fallen by 3.6% during Friday bidding in Hong Kong. Analysts expect further decline in quotations.

The material was prepared with the participation of Andrey Majorov,
a leading analyst of the brokerage company CT Trade

 

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