Lenovo profits are down a staggering 75% in the 'new normal' PC market

Alfonso Maruccia

Posts: 605   +229
Staff
The big picture: The PC market is adjusting to the post-pandemic world, compelling companies to grapple with the fact that customers no longer need to update their machines as frequently as they have in recent years. The pace of the PC business is slowing down, and Lenovo is being particularly impacted by this new normal.

The current PC market is melting Lenovo's profits. The Chinese manufacturer recently published its financial results for the fourth quarter of fiscal year 2022/23, choosing to highlight the positive results in ancillary business divisions while the PC group is experiencing a substantial downsizing.

In the three-month period ending March 31, Lenovo reported revenues of $12.6 billion, marking a 24% downturn compared to the same period in the previous year. Pre-tax profits plummeted a staggering 75% to just $130 million, largely due to workforce restructuring charges.

Lenovo's Intelligent Devices Group, the business division for PC and smart devices, recorded a 33% revenue decrease year-over-year, dropping from $14.69 billion to $9.79 billion. The traditional PC business experienced an unprecedented return to relevance during the Covid-19 pandemic as customers needed to refresh their machines to work, relax, and communicate from home.

The period of heightened demand seems to be largely behind us now while Lenovo's PC inventory is saturated and people are not upgrading their machines as much. In 2021, PC shipments swelled to 350 million, and manufacturers were unable to properly satisfy the unprecedented demand for new systems. According to Gartner's estimations, the first quarter of 2023 – which aligns with Lenovo's fourth quarter – saw a 30% drop in PC shipments to 55.1 million units.

Despite the slowdown, Lenovo maintains that actual sales to end users indicate a "more moderate decline" in demand. The company continues to hold its position as the world's largest PC manufacturer. However, the Chinese corporation reported its first profit decline in three years in the third quarter. In Q4, the company also incurred a one-time, job-cutting restructuring charge of $249 million.

In spite of the sobering results in the Intelligent Devices Group, Lenovo is still trying to impress shareholders with more positive results coming from its other business divisions. The Infrastructure Solutions Group, responsible for enterprise and server sales, saw a 37% surge in revenue to $2.2 billion. Meanwhile, the Solutions and Services Group, which oversees managed services, recorded a 22% increase in revenue and a 16% boost in operating profits.

For the full fiscal year, Lenovo reported a revenue decline of 14% to $61.9 billion, and pre-tax profits dropped by 23% to $2.13 billion.

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ScottSoapbox

Posts: 725   +1,286
Covid and post covid both have shown that most company’s demand forecast is what happened last year +/- a few percent regardless.

Unprecedented demand due to a unique global event? Yeah, that will probably happen again this year.
 

daffy duck

Posts: 145   +106
Does this mean they are going to lower their ludicrous prices in Australia. Given how bad their QC is on normal laptops which often requires you to buy 3 to find a good one, they deserve to suffer big time.
 

Dimitriid

Posts: 2,358   +4,678
Even for smartphones we've seen that people still keep them around for a good 2 years on average and that's for a device they're far more likely to misplace or accidentally damage when dropping and such.

Laptops and PCs are meant to last way, way longer. Honestly if you got a laptop anywhere near the beginning of the pandemic you're gonna be set with it for a good 4-5 years and many people keep the same laptop for even longer: there's just nothing really demanding going on people just want to do spreadsheets and watch videos on their laptops.

Like if they could also be feasible gaming devices maybe but even the best of the best in terms of performance and efficiency from AMD from devices that are mostly not even out yet with the 7840u will likely get you like 30-40 FPS on the latest AAA games on a laptop so not really likely. In fact the steam deck has proven that type of device has a better chance at explosive growth than good old laptops which are mostly work horses.

Maybe Lenovo should think about a 7-10 inch hand held gaming device that could do some good numbers for them, we'll see how many Allies Asus manages to move but it might end up being very successful.
 

toooooot

Posts: 2,279   +1,250
People got more computers to work from home instead of using their work computers.
Now they went to work and dont need new ones anymore.
Eventually the sales will go up.
 

azicat

Posts: 222   +264
People got more computers to work from home instead of using their work computers.
Now they went to work and dont need new ones anymore.
Eventually the sales will go up.
Yes I’ve interpreted the current sales slump as a temporary market correction to the tech purchasing splurge that happened over the human malware period.
 

Watzupken

Posts: 849   +738
This should have been the norm in a sense that PC demand have been declining. Anyway, I have also stopped buying Lenovo products because I realised that there is something fishy about their laptops. All the 3 Lenovo laptops always gets port scanning warnings a few times every single day, but not with PCs from other manufacturers. Initially I thought it is just a remote case, but given recent 3 Lenovo laptops always run into this problem, it is clearly not a remote case.
 

psycros

Posts: 4,783   +7,380
I like Lenovo's laptops for one reason: the keyboards, which are the best in the industry. Their prices are also generally pretty competitive. Unfortunately, their quality control is very hit and miss. If you get a good one you're set for years. If not, you'll be hating life. What I would dearly love to see is a Lenovo 2-in-1 with a numpad, at WUXGA or WQXGA resolution and a decent GPU (Radeon, RTX 2070 or better, even an ARC). So far I haven't found this kind of unicorn being produced by anyone.
 

godrilla

Posts: 1,014   +618
Not sure if it's a scam, Lenovo has a desktop gaming PC selling on Amazon with 7700x and rtx 4080 with windows 11. My friend took a leep of faith and will let me know how it goes.

Lenovo Legion T5 Gamer Desktop Computer (NVIDIA GeForce RTX 4080 16GB, AMD 8-Core Ryzen 7 7700X Processor (Beats i7-12700K), 32GB DDR5 RAM, 512GB NVMe SSD + 2TB HDD, Windows 11 Home) w/Gaming Bundle https://a.co/d/5sMcjAg

 

Kn0xx

Posts: 16   +17
Its not only Lenovo taking hits, its all PC ecosphere getting a F off .... Tech hardware companys did start to sell less ( people have less money to spend on tech ), and yet they increase prices to balance between people who buys from ones that don't buy. Buying a mid/high-tier PC nowdays should be more cheaper, and that is not case. mid-tier PC today costs more than a High-Tier PC from 4 years ago... new tech is getting needless expensive.
 

hwertz

Posts: 425   +212
Well, the things I think keep people from upgrading:

1) Lack of customizations and choices. If you want to save on the CPU, but buy a system with more RAM or more storage space, it's just not going to happen. The low-end choices have 4-8GB RAM, and your choice of ultra-crappy 64 or 128GB storage, or 250GB SSD. Oh wait, you want more storage and RAM? Well, you're getting $1000 of other upgrades with it. Which leads me to point 2...

2) Non-expandable computers. You used to be able to just buy whatever, and pop in more storage and RAM as needed (in the past, I got a system with specs I wanted but low RAM and storage due to point 1 above, and just spent $100-200 on some upgrades straight away.) You now have all these Chromebook-based systems, and non-Chromebook-based ones where they make them thinner and thinner, where EVERYTHING is soldered on. OK, so just get one where they don't do that then, right? Point 3....

3) Lack of information. I got an Acer most recently for the simple reason that they had straight answers on the model description clearly listed what expandability the system had (RAM slot(s), M.2 slot versus soldered on storage, and if it has SATA and room for an HDD. I had spare parts from a defunct system, so in fact I got a system with 4GB RAM, 250GB SSD, and added 16GB RAM (the 4GB was soldered on so it has 20GB), replaced the 250GB SSD with a 1TB one, and added a 1TB HDD. There was nowhere on most sites with this kind of information, and in fact when I went back to Acer's site more recently I didn't see it there either!

So you now have people looking for a new system, and finding systems in their price range with the same or lower RAM than they already have, the same or lower storage than they already have, and just walking away (the CPU would be faster, but it's a harder sell when the other specs are actually lower than what they have.) And for the technically minded, finding out they can't get a straight answer (without having to dive through forums and teardowns of each and every system they are considering buying) on if they can add RAM or storage makes THEM reconsider buying a new system too.

(Side note, why do I want an HDD? HDD storage is still 1/8th the cost of SSD, I see an 8TB notebook HDD listed for $105 without even bargain hunting. With Ubuntu, I put it on the SSD for fast bootup times, put the home directory on HDD so the GB after GB of games, VirtualBox VMs, videos, etc. have plenty of room. I got the 1TB SSD as a fluke, the defunct system was a refurbed Dell that I ordered with a 250GB SSD, apparently whatever rando upgraded it to a 1TB and forgot to downgrade it before they returned it to Dell? It was an SSD model Dell never offered in that system. Lucky me!)