Lenovo Faces 'Sizeable Challenges' as Smartphone Sales Slump 23 Percent

Chinese technology giant Lenovo said it faced "sizeable challenges" Thursday as it saw profits plunge by more than two thirds.

The Beijing-based company remains the world's largest PC maker, but has been trying to broaden its smartphone business as the market for personal computers fizzles.

But it has struggled to keep pace with Apple and Android rivals.

Shares in Lenovo Group were down more than five percent at HKD 4.95 ($0.64) in early afternoon trading. Net profits fell by 67 percent year-on-year to $98 million (roughly Rs. 657 crores) in the third quarter, the company said in a statement.

That came in well short of analysts' estimates by Bloomberg which on average predicted profits of $145.9 million (roughly Rs. 980 crores). Revenues were also down six percent compared with a year earlier.

"Lenovo faced sizeable challenges in its three main lines of business, namely data centre, mobile devices, and PCs and smart devices," the firm said.

The company is battling as consumers opt for smartphones instead of PCs. Rising component prices are also weighing on profits.

Sales of the firm's Moto and Lenovo branded phones slipped 23 percent year-on-year in the three months to December. Its data centre business, which includes servers, storage, software and services also took a 20 percent dive in sales compared with the previous year.

However, Lenovo's PC and smart device business, which includes tablets, still saw sales gains of two percent year on year. That was spurred by strong growth in North America, the company said.

US firms HP and Dell follow Lenovo as leaders in the global PC market. All three increased their share of the market in the final quarter of last year, according to industry trackers.

Lenovo announced in January that it is launching a "Smart Assistant" which recognises user's voices to conduct tasks including web searches and playing music. The firm is also in talks over a potential merger with Japan's struggling PC maker Fujitsu.