Lenovo profits creep up by just 1% despite 20% jump in revenues

Pressure on margins in its home markets have impacted on profits, but the world's largest PC manufacturer looks in good shape on the whole

The world’s biggest PC maker saw its annual net profit rise by just 1% to $829m, a hair short of expectations on Wall Street.

Analysts had forecast profits of $857m but stiff competition in the Chinese smartphone market from the likes of Xiaomi squeezed margins.

The modest increase in profits was surprising given the jump in revenue, which rose a healthy 20% to $46.3bn for the year.

Despite the shrinking PC market, the Chinese giant managed to expand its market share to one-fifth. B2B PC sales rose by 3% year-on-year; an impressive statistic considering that the wider market shrank by the same amount.

Lenovo put this down to “aggressive business expansion in emerging markets outside China from Lenovo brand products and strong growth of the Motorola brand products.”

“In view of the opportunities and challenges of the new Internet+ era, we are ready to transform ourselves from making mostly hardware to a combination of hardware and software services," said Yang Yuanqing, Lenovo Chairman and CEO. "This will spur a new wave of growth for Lenovo in the coming years.”

At home though, Lenovo is struggling to remain competitive with some of the newer kids on the block. The Hong Kong-based company recently launched ShenQi, a sub brand of Lenovo, which – like Xiaomi - will only sell online.

The PC makers Hong Kong listed shares are up nearly a third this year and have risen by 50% in the last 12 months.

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