Lenovo's PC business suffers on component shortages

PCs are Lenovo's biggest business area, but the firm lost out to HP in Q2

Despite PC and mobile gains, Lenovo posted its first quarterly loss in almost two years this month, while also warning of higher costs due to component shortages.

In its first quarterly loss since 2015, Lenovo announced a net loss of $72 million on overall revenue of $10 billion (flat YoY, but up 4.5 per cent QoQ).

PC sales account for about 70 per cent of Lenovo's total revenue ($7 billion), and the business has been propping up other areas that the firm operates in, such as smartphones. However, Lenovo was succeeded as the world's largest PC maker by HP in the quarter through June, and the core PC business is declining faster than that of many competitors: PC shipments in Q2 fell six per cent, compared to a market fall of three per cent.

In the last year, in an attempt to boost its performance in this area, Lenovo has purchased or made offers for the PC businesses of Fujitsu and Samsung - neither of which were performing well, but which Lenovo had to borrow money to pay for.

Component shortages, especially of memory chips and display panels, were partly to blame for the poor PC performance. COO Gianfranco Lanci said that the price of memory is expected to keep climbing "at least until the end of the year" on an earnings call.

Although small compared to the PC unit, Lenovo did enjoy revenue growth (outside its home market of China) in the Mobile Business Group (MBG) and Data Centre Group (DCG). MBG revenue was up 7.6 per cent YoY, to $1.7 billion, with shipments rising 12.3 per cent. DCG revenue rose 14 per cent QoQ (Lenovo did not provide an annual comparison).