China's Lenovo swings to Q3 loss on U.S. tax reform, says outlook challenging

HONG KONG (Reuters) - Chinese personal computer maker Lenovo Group swung to a loss in the third quarter from a year-ago profit, hurt mainly by a one-off charge of $400 million resulting from a U.S. tax reform, and said the short-term outlook was challenging.

However, the company expressed confidence it could drive growth and that U.S. corporate tax cuts would "positively impact" future earnings of its operations in the country.

Tax reforms signed into law in December lower the income tax rate for U.S. firms to 21 percent from 35 percent.

Lenovo, a unit of Legend Holdings, reported a loss of $289 million for the three months to December, versus a $98 million profit a year ago. It had in January said it expected to incur a one-off charge for the nine months ended in December due to a reassessment of U.S. deferred tax assets.

The company's revenue for the quarter was $12.94 billion, up slightly from $12.17 billion a year ago.

Lenovo said its core PC and smart devices business group posted an 8 percent rise in revenue to $9.25 billion as sales exceeded shipments growth, on better average selling prices driven by innovative products and a better product mix.

Its struggling mobile business reported a narrower operating loss before taxation of $92 million, versus a loss of $132 million in the second quarter.

"The group now has a stronger organisation with sharper customer focus and more compelling product portfolio across all its businesses," Lenovo said in a statement to the Hong Kong stock exchange on Thursday.

"Coupled with strong execution, the group remains confident it can build leading positions in every business the group enters and drive profitable growth."

($1 = 6.2842 Chinese yuan renminbi)

(Reporting by Sijia Jiang and Donny Kwok; Editing by Himani Sarkar)