Date
25 March 2019
Lenovo posted a third-quarter profit of US$230 million, compared with a loss of US$190 million in the previous quarter. Photo: Reuters
Lenovo posted a third-quarter profit of US$230 million, compared with a loss of US$190 million in the previous quarter. Photo: Reuters

Lenovo shows you don’t need the best technology to make money

Lenovo’s (00992.HK) latest results came as a pleasant surprise as the company had been struggling in recent years.

While the advance of mobile technology is getting all the attention, Lenovo does not have state-of-the-art technology like Huawei or ZTE in this field.

The PC maker also has a smartphone unit, but its products are seen as less fancy and updated compared to rivals.

Meanwhile, its main source of income – personal computer – is already a mature market, offering limited growth potential.

But Lenovo’s quarterly results have proved most market watchers wrong.

The company’s third-quarter profit reached US$230 million, after posting a loss of US$190 million in the previous quarter.

The profitability of its mobile phone business, which was bleeding, has drastically improved.

The mobile phone unit posted a pre-tax profit of US$3 million in the period, reversing a loss of US$120 million in the same period a year ago. Lenovo acquired the mobile phone unit from Motorola in 2014.

Though some may regard Motorola phones as less updated, some consumers are beginning to get upset by the lack of new features of new products from leading brands such as Apple and Samsung.

As such, Motorola’s offering of basic functions at a much lower price is considered better value for money.

Moto One and Moto Z3, two models unveiled last year, were priced at only US$349 and US$399 respectively, and were well received.

Lenovo’s PC unit, its bread-and-butter business, contributed US$580 million of pre-tax profit. While the market is not expanding, PCs are still a basic equipment needed by many.

Lenovo ‘s market share in the global PC market rose to 24.6 percent. The unit also benefits from the company’s stepped-up efforts in cutting costs and automation.

This article appeared in the Hong Kong Economic Journal on Feb 22

Translation by Julie Zhu

[Chinese version 中文版]

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RT/CG

Hong Kong Economic Journal columnist

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