Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

Lenovo Group Ltd. investors are desperate.

So desperate, it seems, that they bid up the stock on a mere whiff of positive news.

China's premier PC maker posted September quarter earnings that far exceeded estimates on revenue that, well, rose. Growth is so rare at Lenovo -- it happened twice in the past eight quarters -- that some traders felt the stock was worth 5.2 percent more.

They're Loving It
Traders cheered Lenovo's announcement on Thursday
Source: Bloomberg
Intraday times are displayed in U.S. Eastern Time

At least I hope they're cheering the revenue growth, because there's little else in Thursday's announcement to feel happy about. Operating profit for the quarter dropped by 59 percent, while 77 percent of Lenovo's total profit for the period came from an accounting anomaly, er, loophole. It's a sad day when shareholders need to rely on tax credits from losses on two acquisitions to boost the bottom line.

Maybe it's not the earnings that had investors smiling. They might think Lenovo taking a 51 percent stake in Fujitsu Ltd.'s client computing business is something to be pleased about.

Apparently that loss on previous acquisitions wasn't a lesson for the board, because they've just doubled down on PCs to the tune of at least 20.4 billion yen ($179 million), and as much as 30.7 billion yen.  The deal sees them join with with Fujitsu and Development Bank of Japan Inc., which will hold a 5 percent stake.

The joint venture will focus on the research, development, design, manufacturing and sales of client computing devices for the global PC market.

Spare me (and your shareholders)! Lenovo investing even more money in an anemic business is folly, and dressing it up as R&D looks like it might be intended to fool us.

I get why they want to go deeper into client computing: It's the only division that's capable of showing consistent growth and profitability. But we all know that this is an unhealthy addiction, because in the long term PCs are a dying business. Lenovo may be staying there because of old habits, or perhaps is driven by a need to report profits to shareholders every quarter.

Being PC Is Addictive
Lenovo's client computing division remains the only unit capable of delivering profits
Source: Bloomberg
Note: Data not available for March 2015 quarter.

This won't be an easy addiction to kick. At least one rival, Dell Inc., went cold turkey and is trying to wean itself off the quarterly treadmill. Others have pivoted away from client devices.

A decade from now, Lenovo won't be predominantly a PC company, because it will have shifted focus, or succumbed. It should start that process now, while it can.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. The deal is for 17.85 billion yen plus a performance bonus of 2.55 billion yen to 12.75 billion yen.

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Tim Culpan in Taipei at

To contact the editor responsible for this story:
Paul Sillitoe at