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China’s Lenovo brushes off concerns of shrinking global PC market

Revenue for the world’s biggest PC-maker Lenovo CFO Wong Wai-ming says global demand for personal computers has declined for the third consecutive quarter, but the company isn’t worried.

Lenovo CFO Wong Wai-ming told CNBC, “We’re number one in PCs. Frankly, when the market really becomes more normal, we’ll definitely be growing.”

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He added that the company is actually seeing higher growth in other businesses such as infrastructure solutions and services.

In its latest earnings report on Wednesday, Lenovo said it expects the PC market to “return to growth” in the second half of 2023.

The company reported a decline in revenue in the January to March quarter. Revenue in the quarter was $12.63 billion, down 24% from a year ago and the third consecutive quarter of year-over-year declines.

“Fiscal Q4 was the most challenging quarter of the year given the pressures of both the PC market and the global economy,” Lenovo said in the earnings report.

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But the CFO is optimistic that its non-PC businesses — devices, infrastructure solutions as well as solutions and services — can help diversify the business.

“On a full year basis our revenue didn’t really drop that much because the other two business groups are driving significant growth in the infrastructure business. Margins have also been pulled down or compensated for by significant growth in our services. business,” Wong said.

Lenovo’s non-PC businesses grew 7% and now make up about 40% of total revenue for the full year through March. The other 60% of revenue still comes from the PC business.

“The revenue mix of our non-PC businesses grew to nearly 40%. Our clear strategy is working, and our operations remain resilient despite global uncertainties,” said Lenovo Group Chairman and CEO Yuanqing Yang during the earnings call. “Going forward, we will continue to invest in [research and development] To capture the next wave of growth opportunities, we are therefore well-positioned for the future.”

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PC makers were the beneficiaries of a pandemic-led boom that saw laptops, tablets and notebooks as consumers and firms transition from in-office work to remote work. But as soon as employees returned to the office, PC shipments fell.

According to IDC data, worldwide shipments of desktops and laptops are expected to decline by nearly 30% to 56.9 million units in the first quarter of 2023 compared to a year ago.

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Lenovo’s devices revenue declined 33% year-over-year in the first quarter.

But Wong is optimistic about artificial intelligence driving the firm’s devices business. Wong told CNBC that the acceleration of digitization, AI and chatbots “really requires tools”.

Wong said, “Ultimately we will have three key business developments that will drive more revenue than we have in the past – simply by having PCs as our primary driver. Over time we will have three business groups driving profitability “

Lenovo shares were down 1.8% in morning trading Thursday.

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