MORRISVILLE, N.C.– Helped by increased market share in Asia and cost cutting, Lenovo posted a $60.1 million profit for the first three months of 2007 and a $161 million profit for the year ending March 31, Lenovo reported Wednesday.
That’s a huge turnaround for Lenovo, which recently launched another cost-cutting program and on Tuesday announced a stronger alliance with IBM in an effort to increase sales worldwide.
A year ago, Lenovo reported a $116 million loss in the first full 12-months after acquiring IBM’s personal computing division in 2005.
The profits were much higher than expected, and Lenovo reported that its American business operations returned to profitability. The Americas produced $997 million in revenues in the quarter, up 29 percent.
Four financial analysts polled by Bloomberg had expected a $27.5 million profit for the quarter. Sixteen analysts polled by Reuters had expected a $28.8 million profit.
Lenovo’s PC and laptop sales surged in the quarter with laptop shipments jumping 29 percent and desktop sales improving 11 percent. Lenovo’s notebook sales delivered $1.9 billion in revenue, or 55 percent of Lenovo’s sales. Desktop sales were $1.4 billion.
In an attempt to drive laptop sales higher, Lenovo recently unveiled three new models, two of which carry the ThinkPad name but not the IBM logo. Lenovo is also embarking on a global advertising campaign touting the engineering qualities of its laptops.
Overall, Lenovo’s revenues for the year increased 10 percent to $14.6 billion.
"We have significantly improved our business performance, and now we must build on our momentum and strive to grow faster and more profitably than the industry by providing the best-engineered PCs available on the market today," said Chief Executive Officer William Amelio. "Our recently implemented strategic measures – to implement a transaction model globally, improve our supply chain efficiency, enhance our desktop competitiveness, and build the Lenovo brand – will move us swiftly toward closing the efficiency gap between Lenovo and our competitors. We will continue to combine cost competitiveness and efficient delivery capabilities with innovative products to drive increased market share."
Lenovo’s market in Asia increased to 17.8 percent from 16.8. a year earlier, according to research firm IDC. The Asia figures do not include Japan.
The company also is in the process of eliminating more than 1,000 jobs – including 300 among its Morrisville workforce. Many of the jobs will be offshored to China and other emerging markets.
In the fourth quarter, Lenovo said its PC shipments increased 17 percent. Despite that growth, Lenovo fell behind Acer in global sales in one PC market survey. Lenovo had ranked third behind HP and Dell.
"It was a solid quarter and strong fiscal year by any number of measures," said Lenovo’s chairman, Yang Yuanqing. "Our performance confirms we have not only stabilized our business worldwide, but also that our focus on transactional business and emerging markets is beginning to reap very positive results. Lenovo posted gains in market share, revenue and profit in both the notebook and desktop segments as well as in all of our operating geographies, with the Americas business returning to profitability."