Lenovo Q2 revenue drop hits smartphone hopes

LENOVO Group Ltd reported quarterly revenue that missed analyst estimates, with a decline in smartphone sales curbing investor optimism about the world's biggest maker of personal computers (PCs) turning into a force in mobile devices.

Lenovo's earnings came at a time of unprecedented competition in China's smartphone market, with rivals including fast-growing Xiaomi Inc, now the world's No 3 handset maker. At the same time, the company is pulling ahead in the global PC industry.

The Beijing-based company now has a PC market share of 20 per cent and has extended its lead over Hewlett-Packard Co and Dell Inc, according to IDC research.

Sales of laptop and desktop computers rose 0.9 per cent and 6.4 per cent, respectively, in July-September, helping revenue rise 7 per cent to US$10.5 billion (S$13.6 billion). That compared with an US$11.35 billion estimate of 13 analysts according to Thomson Reuters SmartEstimate, which gives greater emphasis to more accurate analysts.

But mobile device sales fell 6 per cent to US$1.4 billion in a rare stumble for Chief Executive Yang Yuanqing, who has been determined to muscle his way to the top of the global smartphone market.

"Smartphone revenue was not that exciting, it was a little bit of a problem," Yang told Reuters in an interview after the results.

He attributed the fall primarily to an accounting procedure pushing revenue from a significant shipment of phones in late September to the following quarter.

Shares of Lenovo shed 5.1 per cent after the results, compared with a 0.2 per cent fall in the benchmark Hang Seng index.

Nomura analyst Leping Huang said a reduction in handset subsidies from Chinese mobile phone networks have adversely affected Lenovo's home market.