Lenovo sees Q1 profits soar on higher PC shipments

Lenovo saw its first-quarter profits soar on higher PC shipments

Lenovo Group's fiscal first-quarter profit jumped more than tenfold on higher PC shipments as the company's ongoing efforts to cut costs and operate more efficiently yielded results.

Lenovo's fiscal first-quarter revenue rose 13 per cent to $US3.9 billion, as every geographical region reported double-digit shipment growth for the first time since its 2005 acquisition of IBM Corp.'s PC Division. The company's net profit rose even faster, hitting $US67.8 million, an increase of 1184 per cent over the same period last year. The profit came despite a $US45 million restructuring charge recorded during the period.

"Our board and management team are very encouraged by Lenovo's performance over the last couple of quarters," the company's CEO, William Amelio, told analysts during a conference call. But he cautioned that Lenovo must continue to improve its operational efficiency and control expenses to sustain this growth in the coming quarters.

Yang Yuanqing, Lenovo's chairman, was upbeat about the results, saying they proved the acquisition and integration of IBM's PC Division was a success.

Lenovo's PC shipments during the quarter rose 22.3 per cent to nearly 4.9 million units, up from 4 million during the same period last year, according to IDC. Lenovo did not reveal the total number of units shipped during the period.

Lenovo's biggest gains came in Europe and the Americas, where the company had lost money after its acquisition of IBM's PC Division. Both regions are now profitable. Shipments in Europe rose 22 per cent, while shipments in the Americas were up 15 per cent. Rising demand from India and Southeast Asia led Lenovo's shipments in Asia, excluding China, to rise 12 per cent.

But Lenovo's biggest gains came from China, where PC shipments rose 30 per cent.

Notebook PCs accounted for 53 per cent of Lenovo's revenue during its fiscal first quarter, with worldwide shipments up 26 per cent over last year. Desktop demand also showed healthy growth, with shipments up 20 per cent, representing 43 per cent of revenue. Lenovo's handset business, which is confined to China, was relatively flat, with shipments rising just 2 per cent and accounting for 3 per cent of revenue.

Lenovo remains the world's third-largest PC maker, according to IDC, but faces pressure from Taiwanese rival, Acer, which has been growing quickly and aims to overtake Lenovo as number three by the end of this year.

Lenovo and Acer were evenly matched during the first quarter of the year, with both companies holding 6.7 per cent of the market. Lenovo managed to reclaim the number three spot during the second quarter, but Acer is gaining ground, increasing its shipments during the period by 55.4 per cent, IDC said.

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Sumner Lemon

IDG News Service

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