By Eva Dou
BEIJING-- Lenovo Group Ltd. posted a disappointing fiscal
fourth-quarter profit slump as it works to digest acquisitions
meant to broaden its business beyond personal computers.
The Chinese computer maker said Thursday its net profit for the
quarter through March fell nearly 37% from a year earlier, missing
analysts' expectations.
"We are ready to transform ourselves from making mostly hardware
to a combination of hardware and software services," said Lenovo
Chairman and CEO Yang Yuanqing in a press release.
Lenovo plans to improve its customer interaction and service
offerings this year, the company said in a filing with the Hong
Kong Stock Exchange.
Lenovo in October closed its $2.91 billion acquisition of
Motorola Mobility from Google Inc. and $2.1 billion purchase of
International Business Machines Corp.'s low-end server
business.
The company faces challenges this year in integrating the two
new businesses as the Chinese smartphone market slows and global
spending on servers contracts. Lenovo's mobile and enterprise
business units posted losses for the most recent quarter, but the
company has previously said it expects both will be profitable
within a year and a half.
Geopolitical issues present one challenge for Lenovo, due to
wariness between Beijing and Washington over cyberspying and
information security. The U.S. Navy is looking at dropping IBM
servers from some weapons systems after the Lenovo acquisition, a
Navy spokesman told The Wall Street Journal this week. Lenovo is
likely to lose server sales in the U.S. and gain them in China due
to some customers' belief that local brands are more secure, said
Yuanta Securities analyst Vincent Chen.
Lenovo says it continues to sell servers and other products to
the U.S. government and will work cooperatively to address concerns
any individual agency may have.
Founded in Beijing, Lenovo acquired IBM's PC business in 2005.
The company now has headquarters in both the U.S. and China and
surpassed Hewlett-Packard Co. to become the world's No. 1 PC maker
by shipments last year.
As the global PC market has become saturated, Lenovo has
expanded into other sectors including smartphones and servers.
Net profit for the quarter fell to $100 million from $158
million a year earlier, while revenue rose 20.7% to $11.3
billion.
Write to Eva Dou at eva.dou@wsj.com
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