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Oracle, Lenovo Asia sales may fall

Asia risks a slowdown as companies cut capital expenditure and rising debt costs eat into spending.

india Updated: Jun 16, 2006 17:53 IST

Oracle and Lenovo Group, the world's third-largest makers of software and personal computers, respectively, said demand in Asia may slow this year as rising interest rates crimp business and consumer spending.

Asia risks a slowdown as companies cut capital expenditure and rising debt costs eat into spending, Lehman Brothers Holdings said. Concern among investors that higher rates worldwide, stemming from increases in the US, will curb growth in Asia caused regional stock markets to tumble.

"If interest rates go up, the propensity to spend on capex may go down," Frank Koo, managing director of Oracle's Singapore unit, said at a conference today. Ravi Marwaha, president of Lenovo's Asia Pacific division, said "we don't see a slowdown at the moment, but it is possible."

Stats Chippac's chief executive officer said that he saw "weakness" in the personal computer market "in the short term." Stats Chippac is Southeast Asia's largest provider of chip-testing and packaging services.

Koo said concern about inflation may "potentially" lead to lower software sales as company expenditure declines. Oracle has factored any possible slowdown into the company's long-term plans, he said.

The Morgan Stanley Capital International Asia Pacific index has slumped 15 per cent from its record close on May 8 amid speculation that regional exports may cool as central banks raise interest rates globally to keep inflation at bay. The US Federal has raised its key rate 16 times in a row.

"It is possible that if the current thinking continues that people will start to cut back on investments," Lenovo's Marwaha said. "We don't see it at the moment. Regardless of what happens to the economy, Asia will be at the forefront of whatever growth there is," he said.

China, where Lenovo has about a 36 per cent market share for personal computers, and India are the company's fastest-growing markets. The Greater China region is Lenovo's largest contributor of revenue, followed by the US And Japan, while India is among the top 10, Yang Yuanqing, Lenovo's chairman, said.