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China tech

Lenovo says coronavirus will spur PC and data center demand

World's largest notebook maker suffers 63% drop in quarterly net profit

China's Lenovo has the largest share of the world's PC market.   © Reuters

TOKYO -- The new coronavirus pandemic will spur long-term growth in PCs and data centers, Lenovo Group said on Wednesday as the world's largest notebook computer revealed a fall in quarterly profit after supply chain disruptions.

Yang Yuanqing, Lenovo's chairman and chief executive, said the company is seeing increased demand for PCs due to consumers shifting to working and studying from home. "We believe this will not be just short-term demand," he told media on Wednesday.

Yang said those shifts will also create more demand for Lenovo's data center business, calling it the "new normal requirements." Lenovo CFO Wong Wai Ming also suggested that the shift will "accelerate development of 5G services."

PCs and smart devices accounted for almost 80% of the company's revenue of $50.7 billion for the fiscal year that ended in March. As some PC users have shifted to mobile phones, Lenovo's data center business has become part of its effort to diversify its revenue sources.

The Chinese company was hit by the impact of the coronavirus outbreak on its supply chain, with net profit for the quarter from January to March falling 63.5% to $43 million. Factories in China, including a plant for mobile phones in Wuhan, had to close.

The overall impact of the disruption for the full fiscal year ending in March was limited. Lenovo's annual net profit rose 11% to $665 million.

According to a report by research firm Gartner, worldwide PC shipments fell by 12.3% in the first quarter of this year.

"Once coronavirus-related lockdowns expanded to other regions, there were new, sudden pockets of PC demand for remote workers and online classrooms that PC manufacturers could not keep up with," said Gartner's research director Mikako Kitagawa.

Lenovo's Yang said production capacity in China was back to 100%, and that supply chain problems such as material shortage would be "very small" by the next quarter. "We are very confident that we can meet the booming demand," he said.

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