Lenovo Considers Price Hikes, Other Measures to Tackle Brexit

(Bloomberg) -- Lenovo Group Ltd., the world's biggest personal-computer maker, is considering price hikes and other measures to counter a falling pound and the economic uncertainty caused by Britain's decision to leave the European Union.

Lenovo will take the steps required to maintain profitability, Chief Financial Officer Wai Ming Wong said after the company's annual general meeting Thursday. Asked if this would include job cuts in the region, he said that was among several options but wouldn't go into specifics.

“I wouldn't exactly want to nail down to something,” Wong told reporters after the meeting. “If you were to cut costs, is it really headcount that's the only area?”

The Beijing-based computing giant isn't alone in pondering ways to cope with the fallout from Britain's decision, which pushed the pound to its lowest levels since 1985 and stoked fears of a downturn. Fellow PC maker Dell Inc. intends to hike prices 10 percent in Britain to cope with the fluctuations, according to the Register. And British corporations may be planning to freeze recruitment or move their headquarters abroad.

Businesses in the U.K. and elsewhere are expected to curb spending on technology as they assess the situation, while consumer confidence in the region is expected to take a hit. Beyond market uncertainty, a weakening British currency will compress margins for Lenovo, which buys components in U.S. dollars.

Lenovo gets about a fifth of its earnings from Europe, Wong said. Sales in Europe, the Middle East and Africa made up 26 percent of its revenue in the year ended March, according to data compiled by Bloomberg. Lenovo's products make up 19 percent of Western Europe's total PC market, Credit Suisse analyst Thompson Wu wrote in a June 27 note.

“To the extent that we need to pass things on to the customer, we will,” Wong said. “Rather than just increasing the price to pass the costs to customers, we want to see other ways to generate efficiencies and grow the business. So I wouldn't say just increasing the price is the only way to deal with this situation.”

The company however said it doesn't anticipate a major impact from Brexit. Lenovo has experienced major currency fluctuations across Latin America and Europe in past years and was conversant with ways to manage the pound's falling value, Chairman and Chief Executive Officer Yang Yuanqing said.

“We have a whole set of tools to manage it,” he said through a translator. “We can use our efficiency to digest it. Sometimes we'll increase our prices, and we believe we can manage it well and there shouldn't be any major impacts on Lenovo.”

To contact the reporter on this story: David Ramli in Hong Kong at dramli1@bloomberg.net. To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Edwin Chan, Reed Stevenson