Lenovo Group’s business of mobile phones is continuing to contract, while its personal computer division managed to grow slightly due to overwhelming competition during the holiday shopping season.
The largest maker of PCs in the world posted a profit that plunged over two thirds during its December quarter and missed projections for analysts after its position in the U.S. was threatened by HP Inc.
Sales of smartphones were down close to one quarter around the world as Lenovo lost market share to its rivals like Huawei both home and abroad.
Lenovo is still the leader in the PC market that continues to struggle through a long downturn as consumers opt to purchase smartphones for handling daily tasks.
However, Lenovo barely was able to keep its No. 1 spot against HP as its biggest rival increased its share in the U.S, according to data at IDC the research firm.
Lenovo in its mobile division is placing its hopes on its premium phone, such as one that has augmented reality capabilities, to revive the division that is losing money.
However, it continues to cede ground to its rivals that have been winning over users with aggressive use of sales tactics.
Lenovo shares had dropped 6.7% by last afternoon trading in Hong Kong, which would represent their biggest drop since last May.
An increase in prices of memory chips pressured Lenovo’s margins in its main business. The PC industry has finally showed signs of becoming more stable.
PC shipments worldwide for Lenovo were down 1.5% during its fourth quarter, which was less of a decline that the previous quarter’s 4% drop.
Net income was down 67% to end the quarter at $98 million, which was far below expectations of analysts of $145.8 million.
Revenue was down 6% to end the quarter at $12.2 billion, while estimates by analysts were $11.7 billion.
The company, based in China, warned on Thursday that the PC market would remain challenging due to rising prices for components and macroeconomic uncertainty.
Lenovo has been cutting jobs, liquidating assets and moving into devices that are higher-end to help withstand the shrinking demand as well as greater competition.
Just three years ago Lenovo acquired Motorola Mobility for $2.9 billion, but the smartphone business still lags behind Huawei, Oppo and Vivo in market share.
The mobile business at Lenovo produced a $112 million operating loss after its sales dropped 23% to end at $2.1 billion.
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