Editor’s note: Beau Skonieczny is an analyst for the Computing Practice at Technology Business Research.

HAMPTON, N.H. - Lenovo is effectively navigating a difficult PC environment by focusing on profit expansion.

As global PC demand continued to dwindle in response to elongated refresh cycles and cannibalization from mobile devices, Lenovo’s PC revenues declined by 1.6% year-to-year, but still outpaced the industry average, as major PC vendors like HP posted double-digit declines.

Lenovo exploited a wide range of new touch-based Windows 8 notebooks such as the IdeaPad Yoga series to help drive a more premium sales mix in the global consumer and SMB market segments. (Read WRALTechWire’s Lenovo earnings report online.)

TBR believes a stronger premium consumer PC portfolio combined with a strengthened presence in North America contributed to a 160 basis point increase year-to-year in corporate gross margin to 12.3% in 1Q13.

Lenovo’s focus in PCs going forward will be to drive further margin gains without sacrificing its market position as it fuels growth in other product categories, such as smartphones, tablets and server products. TBR believes that by shifting PCs into the protect status of Lenovo’s corporate protect and attack growth strategy, the company is well positioned to achieve margin gains in PCs as it allocates resources to new growth opportunities.

Mobile Device Expansion

TBR expects Lenovo will continue to augment limited growth in PCs with global expansion of its mobile devices. In 1Q13, Lenovo achieved a 4.5% revenue growth year-to-year, bolstered by the Mobile Internet and Digital Home (MIDH) segment, which grew nearly 75% year-to-year, accounting for over 9% of revenue. Growth in mobile was highlighted by continued smartphone expansion in China, as well as modest growth in other emerging markets such as India.

As the number two smartphone vendor in China, falling closely behind Samsung, Lenovo has established scale in the region and has set its sights one improving profitability after achieving a positive smartphone operating margin for the first time in calendar 4Q12.

Following investments in expanding its smartphone portfolio in calendar 2012, Lenovo strengthened its sales mix of premium 5-inch and larger smartphone models, such as the K900. TBR believes an improved mix, coupled with scaling benefits helped strengthen Lenovo’s smartphone profitability in 1Q13 and will continue to improve throughout 2013 as the company builds its footprint in other emerging markets like Russia.

Coinciding with the purchase of CCE in Brazil, Lenovo will realign its geographic units to cater more explicitly to LATAM customers

In 1Q13, Lenovo announced a reorganization of its geographic segments by breaking out LATAM from APAC and creating the new Americas business unit.

TBR believes the realignment will help Lenovo more effectively execute on its growth strategy in LATAM as it integrates with CCE by driving synergies with manufacturing and supply chain operations in the Americas.

As a result, we expect Lenovo’s profitability in the Americas to improve throughout 2013.

[LENOVO ARCHIVE: Check out seven years of Lenovo stories as reported in WRAL Tech Wire.]