Lenovo, the world’s No. 2 PC maker, is not only increasing its global market share but also its sales and profits.
The company, which maintains its executive headquarters in Morrisville, reported early Wednesday that its quarterly sales surged 35 percent from a year ago to $7.79 billion.
Earnings also climbed, hitting $143.9 or 1.4 cents per share. That total exceeded estimates of $119.3 million from eight analysts surveyed by Bloomberg.
Shortly after the earnings were announced, Lenovo also said that its founder and chairman Liu Chuanzhi was stepping down to focus on Lenovo’s parent firm, Lenovo Holdings. He will be replaced by Chief Executive Officer Yang Yuanqing, who had served as chairman from 2005-2009. Yang returned as CEO and Liu as chairman in 2009 as part of a corporate reorganization. (Read details here.)
“Lenovo’s performance this quarter was outstanding. Despite significant investments for future growth, pre-tax income increased and the Company over-achieved its targets,” Liu said in a statement. “The management team developed strategies in the right way, built a solid corporate culture and the morale of the whole staff is very high. The Board is very satisfied.”
Lenovo climbed past Dell to become the world’s No. 2 PC maker this summer. It trails only HP.
Rapid Growth Globally
‘In just two quarters, Lenovo has gone from the number four to the second largest PC vendor in the world,” Yang noted. “We achieved balanced growth across all markets, product categories and geographic regions.
“In China, we continued to extend our lead, while in Emerging Markets we have been growing more than three times the market growth rate. Including the successful integration of both the NEC and [German-based] Medion businesses in Mature Markets, we recorded for the first time a turnover exceeding that of the China market. Not only has profitability substantially increased, but also with record market share,” he added.
“We are very optimistic about the future of the PC industry. Our aspiration is not only to be the leader of traditional PCs, but to also accomplish much more in the extended PC categories, such as the smartphone and tablet.”
The company has diversified over the past two years, adding smartphones, tablets and spinning off a videogaming company. Lenovo has also acquired the top PC and personal electronics firm in Germany and formed a joint venture in Japan with NEC.
“Demand from corporate clients has been very strong,” Roxy Wong, who rates Lenovo shares “buy” at Mirae Asset Securities in Hong Kong, told Bloomberg news before the earnings were reported. Lenovo also increased sales to consumers in emerging markets such as India, Wong said.
Lenovo’s shares are up 14 percent on the Hong Kong stock exchange while the rest of the top Hong Kong index known as the Hang Seng is down 14 percent.
Lenovo rose 4.9 percent to HK$5.60 at the close of Hong Kong trading before the earnings announcement. The stock has gained 12 percent this year, compared with the 14 percent drop in the city’s benchmark Hang Seng Index.
The maker of Thinkpad laptops increased its share of the global PC market to 13.5 percent last quarter from 11.1 percent a year earlier, overtaking Dell, whose market share fell to 11.6 percent from 12.2 percent, according to researcher Gartner Inc. Lenovo trailed only Hewlett-Packard Co. (HPQ), whose market share rose to 17.7 percent from 17.3 percent, Gartner said.
Demand from Lenovo’s corporate clients in the U.S. and Europe is very strong, Yang said last month. Lower prices offered by the company doesn’t mean it is “sacrificing” profit, he said at the time.
Worldwide computer demand faces “challenges” from the pace of global economic recovery and the ongoing debt crisis in Europe, Lenovo said in the statement today.
The recent floods in Thailand may impact the global supply of hard-disk drives, which “would likely affect the PC supply in the short term,” Lenovo said, without providing details. The company will monitor the situation “closely,” Lenovo said.
Read the full earnings report here.
(Bloomberg news contributed to this report.)
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