Lenovo Warns of Coronavirus Challenges, Third-Quarter Profit Beats Expectations

Chinese personal computer maker Lenovo warned on Thursday it faced short-term volatility and challenges from the coronavirus outbreak, as it reported a better than expected quarterly profit and record revenue.

The world's largest PC maker is among companies facing disruptions to their supply chain after local governments extended a Lunar New Year holiday and imposed strict travel curbs to limit the spread of the coronavirus.

One of Lenovo's biggest factories is in the central city of Wuhan, the epicentre of the outbreak, where businesses remain shut, although its factories in the cities of Shenzhen and Hefei resumed work on February 10.

"The vast majority of the group's factories in China have reopened and are operational on a limited basis, although its suppliers and even logistics services across the countries remained impacted," Lenovo said in a statement.

"Nevertheless, given its extensive global footprint, the company is well-positioned to address the supply challenges by leveraging its strength as a global company with worldwide manufacturing capabilities and supply chain efficiency."

Shares of Apple and its suppliers dropped on Tuesday after the iPhone maker warned sales will not meet forecasts in the current quarter as the coronavirus outbreak was pressuring its supply chain.

Lenovo was given a respite after an early January trade agreement between Washington and Beijing eased 18 months of tensions.

Laptop computers were among $156 billion worth of Chinese goods that Washington had threatened to hit with tariffs in December, along with cellphones and toys, which US. President Donald Trump later decided not to implement.

Lenovo said on Thursday net profit for the quarter ended December rose 11 percent to $258 million thanks to strong demand for its PCs and smart devices, beating an average $223 million estimate of seven analysts, according to Refinitiv data.

Revenue rose to $14.1 billion from $14 billion in the same quarter last year, compared to an average $13.6 billion estimate of 10 analysts.

The global PC market grew 2.3 percent in the quarter to December, as customers replaced machines to migrate to Windows 10, market research firm Gartner said last month. Lenovo took a 24.8 percent market share during the quarter, ahead of rivals HP and Dell, it said.

Shares in Lenovo rose 2 percent by the midday break in Hong Kong on Thursday before the results. The have risen 5.7 percent since the start of the year but are still down more than a quarter from the 3-1/2-year high hit in April.

© Thomson Reuters 2020