Lenovo Group reported a quarterly profit jump of 30 percent on strong sales in developing markets, but growth slowed amid global economic weakness.
The world’s second-largest personal computer maker said it earned $144 million in the three months ending June 30 on $8 billion in global sales. The profit growth rate was down from the previous quarter’s 59 percent increase.
PC shipments in the Asia-Pacific region and Latin America rose 59.2 percent while those to Europe, the Middle East and Africa were up 62.3 percent.
“Despite uncertainties in global economic conditions impacting the PC market in the short term, we will remain focused to outperform the worldwide PC market in a profitable way,” said chief financial officer Wong Waiming in a conference call with reporters.
“Our strategic investments in mobile internet have started contributing to the growth in sales and improved profitability.”
Analysts liked the performance.
“The PC market is not doing well globally, but Lenovo’s market share gains are offsetting that weakness,” Kirk Yang, Hong Kong-based head of Asia technology research at Barclays Plc, told Bloomberg.
He wasn’t alone.
“This set of results reaffirmed Lenovo is executing well, and continues to deliver above industry growth despite the tough macro environment,” Jonathan Ng, an analyst at CIMB-GK Pte., wrote in a report. “Lenovo will tighten its costs to ensure a balanced growth.”
The company passed Dell Inc. last year as the second-biggest PC maker and said Thursday it has narrowed the global market share gap with industry leader Hewlett-Packard Co.
“Although the economic environment is somewhat similar to the 2008-2009 downturn, Lenovo’s results are much stronger because we have the right strategy and great execution,” said Yang Yuanqing, Lenovo’s chairman and CEO.
“Our businesses in emerging markets outside of China, our consumer business and MIDH business all achieved rapid expansion, providing the balanced pillars to support our overall performance. Our business in China and our global commercial business maintained strong profitability, which allows us to secure plenty of resources to invest in growth areas and ensure the company’s overall healthy performance,” he added. “Although we’re in a challenging environment, we are confident that by continuing to execute our Protect and Attack strategy, Lenovo can achieve sustainable growth and healthy returns in the PC+ era.”
Lenovo said it sold 5 million smartphones in China in the quarter, passing PC sales by number of units for the first time.
The company, with headquarters in Beijing, got into wireless Internet in 2010. It has launched smartphones and Web-linked tablet computers to compete with Apple Inc., South Korea’s Samsung Electronics Corp. and Taiwan’s HTC Corp.
Lenovo launched its latest ThinkPad notebook last week and said it is designed to appeal to users who want the convenience of a tablet, with a faster startup, lighter weight and longer battery life.
Lenovo provided a breakdown of sales and performance by geography:
North America: “Consolidated sales totaled US$1.2 billion year-over-year for the first fiscal quarter, an increase of seven percent year-over-year, comprising 15 percent of the Company’s worldwide sales. In an overall market that dropped ten percent year-over-year, Lenovo’s PC shipments grew at an 8.6 percent clip in the first quarter, with a balanced strong showing in sales to both commercial and consumer customers. With a record high market share in the United States of eight percent, Lenovo was able to recapture the number four share position in the region.”
China: ”Lenovo recorded US $3.5 billion in consolidated sales in the first fiscal quarter, an increase of 24 percent year-over-year, and accounting for 44 percent of the Company’s worldwide sales. During the first quarter, Lenovo further strengthened its number-one position in China by 3.9 points, which resulted in an industry-leading market share in China of a record 35 percent, further widening the gap between Lenovo and its nearest rivals. Lenovo’s PC shipments in China increased nine percent year-over-year in the quarter, compared to an overall industry decrease of PC shipments in China of 2.8 percent.”
Asia Pacific/Latin America region: “Lenovo’s PC shipments for the first fiscal quarter increased 59.2 percent, significantly outperforming the overall industry, which saw a decrease of 3.9 percent year-over-year. Consolidated sales totaled US$1.7 billion for the first quarter, or 21 percent of the Company’s worldwide sales. Lenovo recorded double-digit market share in the region with 11 percent, gaining 4.4 share points year-over-year. Highlights for the quarter included a number one position in Japan with 25.4 percent market share, attributable to Lenovo’s successful integration of its NEC joint venture, which is entering just its second year of operation. In addition, Lenovo recorded an all-time high in India of 17 percent share while growing more than five times faster than the industry as a whole there, and PC shipments in Brazil increased more than 20 times the overall industry growth rate in that country.”
Europe Middle East/Africa: “PC/laptop shipments increased an impressive 62.3 percent in the first fiscal quarter year-over-year, more than six times an overall industry growth rate in the region of 9.1 percent. Consolidated sales increased 62 percent year-over-year during the first quarter, to US$1.6 billion in consolidated sales, or 20 percent of the Company’s worldwide sales. Despite the economic challenges faced by several European countries, Lenovo gained 2.9 share points year-over-year. Lenovo’s successful integration of its Medion acquisition has helped the Company improved its position in Western Europe. In Russia, Lenovo doubled its PC shipments year-over-year.”
Lenovo operates its global executive headquarters in Morrisville.
[LENOVO ARCHIVE: Check out six years of Lenovo stories as reported in WRAL Tech Wire.]
(Bloomberg news and The Associated Press contributed to this report.)