Lenovo beats profit forecasts on strong demand

Citing strong demand from customers and growth in emerging markets, Lenovo Group has reported higher than expected second-quarter profits.

Those profits reached $HK354 million ($US45.6 million as of September 30), beating Thomson One Analytics' consensus forecast of $HK300 million by a wide margin.

Lenovo said its second-quarter sales totalled $HK28.5 billion.

Breaking its second-quarter revenue down by product, Lenovo said notebooks were the biggest earner for the company during the second quarter, bringing in 48.7 per cent of revenue, followed by desktop PCs, which accounted for 45.6 per cent of revenue.

Mobile handsets accounted for 4 per cent of the company's revenue and others - a category that includes servers, printers and IT services, among others - contributed 1.7 per cent.

Lenovo's mobile phone business showed particularly strong growth, with revenue reaching $HK1.1 billion, more than double the revenue earned during the same period last year, the company said. With shipments of 1.4 million mobile phones during the second quarter, an increase of 139 per cent over the same period last year, Lenovo claimed the number five spot among handset vendors in China.

In geographic terms, Lenovo said 35.8 per cent of its revenue came from Greater China, the name given to the region that includes Hong Kong, Taiwan and China. The Americas accounted for 31.8 per cent of revenue; Europe, the Middle East and Africa contributed 20.4 per cent; and the rest of Asia chipped in 12 per cent, Lenovo said.

Its growth in China and India exceeded the overall PC industry in terms of both revenue and shipment volume. Although the company grew unit shipments to record levels in the Americas, it saw lower year-on-year growth than the overall PC industry, it said.

Most analysts are pleased with how Lenovo has performed in recent months and see bright prospects ahead for the company. It has been winning market share in China from rivals such as Dell, and the company is likely to see its notebook share increase in coming quarters, Goldman Sachs analyst, Henry King, wrote in a recent research note.

But in a different research note, Deutsche Bank analyst, William Bao Bean, warned that while Lenovo was very strong in China, the company was weaker in other markets such as the US, where it faced tough competition from rivals Acer and Dell.

Bean also cited figures from Gartner, showing Lenovo losing market share faster in Japan than in any other market.

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Sumner Lemon

IDG News Service
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