Lenovo Reports Second Quarter 2012/13 Results

  Lenovo Reports Second Quarter 2012/13 Results

  *Record pre-tax income of US$204 million
  *Record quarterly sales of US$8.7 billion
  *Record market share of 15.6 percent
  *Basic EPS of 1.58 US cents, or 12.25 HK cents
  *Net cash reserves of US$3.6 billion (as of September 30, 2012)

Business Wire

HONG KONG -- November 08, 2012

Lenovo Group today reported results for its second fiscal quarter ended
September 30, 2012. Outgrowing the market in all geographies, Lenovo continued
its push towards becoming the number one vendor in the PC industry, with
record quarterly sales of $8.7 billion, an 11 percent increase year-over-year.
While growing faster than the top four PC companies for three straight years,
Lenovo also turned in another quarter of record pre-tax income at US$204
million, evidence that the Company continues to build upon its track record of
profitable growth.

During the second fiscal quarter, Lenovo’s worldwide PC shipments grew 10.3
percent, in a difficult market that was down eight percent year-over-year, the
14^th quarter in a row that the company has grown faster than the PC industry
as a whole. In this challenging environment, Lenovo achieved its highest-ever
worldwide market share of 15.6 percent*, gaining share points in every
geography, every product category in which it competes, and in every
respective customer segment.

This balanced growth has become a hallmark of Lenovo over the past three
years, and is the result of the Company’s continued focus on its “protect and
attack” strategy, whereby Lenovo strengthens its position in those places or
markets where it enjoys a solid business, while simultaneously reaching
outwards into new places or markets where opportunities to reach even more
customers present themselves. Entering these new markets is essential to
Lenovo continuing its position as a leader in the PC Plus era, where tablets,
smartphones and smart TVs continue to gain traction and capture record
customer acceptance.

In addition to its impressive share gains, Lenovo turned in net income of
US$162 million in the second quarter, an increase of 13 percent
year-over-year, with gross margin at 12.1 percent. Gross profit for the second
fiscal quarter increased 11 percent year-over-year, to US$1.1 billion, while
operating profit for the second quarter was US$206 million, a 24 percent
increase year-over-year.

Basic earnings per share for the second fiscal quarter was 1.58 US cents, or
12.25 HK cents. Net cash reserves as of September 30, 2012, totaled US$3.6
billion. Lenovo’s Board of Directors declared an interim dividend of 4.5 HK
cents per share.

As the PC Plus era continues to take shape, Lenovo made several bold moves
during the second fiscal quarter to solidify its leadership position,
announcing two significant acquisitions: CCE, widely known in Brazil as a
leader in PCs and consumer electronics, which significantly expands Lenovo’s
presence in the world’s third-largest PC market, including manufacturing
capabilities; and Stoneware, a software company based in Indiana, focused on
cloud computing, which will help Lenovo grow its capabilities for both
commercial and consumer cloud offerings, particularly the ability to provide
secure content across multiple devices in education and government sectors.

Both of these acquisitions came quickly on the heels of Lenovo’s announcement
of a global partnership with EMC, forming a server technology development
program to help drive innovation and extend Lenovo’s capabilities in x86
industry-standard servers. As part of this agreement, Lenovo will bring these
servers to market on its own, and embed them in selected EMC storage systems
over time. Just last week, Lenovo announced the formation of the Enterprise
Product Group, a new business unit that will focus on expanding the Company’s
server, storage, networking and software offerings geared to a variety of
commercial customers, including large enterprises, small/medium businesses and
system integrators.

Also during the second quarter, Lenovo announced that it was opening a
manufacturing line in North Carolina, creating 115 new manufacturing jobs,
boosting its competitive position as a global company with strong local roots.

“With the strong execution of our Protect and Attack strategy, Lenovo has
continued its strong and balanced growth momentum. Our global PC market share
reached another historic high, moving us closer to our dream of becoming the
worldwide PC leader. With four years’ effort, our Consumer PC business has
become the world’s number one in this segment for the first time. Our
smartphone business in China, which we started only two years ago, has again
strengthened its number two position,” said Yang Yuanqing, Chairman and CEO of
Lenovo. “More importantly, we not only grew rapidly, but also improved our
profitability consistently, with pre-tax income reaching a record high this
quarter. As emerging markets outside of China and Mature Transactional
business have entered the profitable growth stage, and as our smartphone and
other MIDH (mobile internet/digital home) business continue to grow, Lenovo’s
overall profitability will continue to improve.”

GEOGRAPHIC OVERVIEW

  *Lenovo China achieved US$3.9 billion in consolidated sales in the second
    fiscal quarter, an increase of 20 percent year-over-year, accounting for
    44 percent of the Company’s worldwide sales. During the second quarter,
    Lenovo grew its number-one position in China, the world’s largest PC
    market, to a leading market share of 34 percent, up 2.4 points
    year-over-year. Lenovo’s PC shipments in China grew eight percent
    year-over-year in the quarter, a significant result given that the overall
    China PC market was flat. As the number one PC vendor in China, Lenovo’s
    PC shipments are greater than that of the next top four vendors combined.
    Of particular note, is Lenovo’s continued strength in China’s emerging
    cities, and the Company continues to build its reputation with other
    product offerings such as smart phones, tablets and smart TVs, as it leads
    China’s customers into the PC Plus era.
  *In the Asia Pacific/Latin America region, Lenovo achieved a record market
    share of 11.5 percent in the second fiscal quarter, up 1.6 points
    year-over-year. In a PC market that was down ten percent year-over-year,
    the Company grew its PC shipments across the region by an impressive five
    percent. Lenovo was the leading PC vendor in Japan, the world’s fifth
    largest PC market, and number one in India as well, where the Company grew
    31.8 percent and gained 4.8 share points year-over-year. In the Latin
    America countries (not including Brazil), Lenovo recorded its first-ever
    overall double-digit market share, while picking up 4.1 share points
    year-over-year. Consolidated sales across the region totaled US$1.8
    billion for 21 percent of Lenovo’s worldwide sales.
  *For the first-time ever, Lenovo in Europe Middle East/Africa achieved
    double-digit market share, ending the second fiscal quarter at 10.8
    percent, an increase of 3.0 share points year-over-year. These gains
    helped Lenovo become the third-largest PC vendor in EMEA. Lenovo’s share
    gains were consistent throughout the region, growing in all markets. Among
    the highlights for the second quarter were the Company’s number one
    positions in Russia and Germany, where in the latter Lenovo gained 3.9
    additional share points year-over-year. Although the overall industry was
    down eight percent across the region, Lenovo grew its PC shipments by 27
    percent year-over-year, a stunning result. The Company had consolidated
    sales in the second quarter of US$1.8 billion, a year-over-year
    improvement of 12 percent, and good for 21 percent of Lenovo’s total
    worldwide sales.
  *Lenovo’s PC shipments in North America in the second fiscal quarter
    increased eight percent year-over-year, in a market that fell badly by
    about 12 percent. In this environment, the Company picked up 1.6 share
    points to a record high market share in the U.S.A. of 8.3 percent.
    Consolidated sales grew seven percent year-over-year to US$1.2 billion in
    the second quarter, or 14 percent of Lenovo’s total worldwide sales.
    Triggered by a ten-times increase in its retail presence throughout the
    U.S.A, Lenovo saw significant sales gains in its consumer business there.
    Commercial account growth was strong there as well.

PRODUCT OVERVIEW

  *For the first-time ever, Lenovo became the world’s largest supplier of
    Laptop PCs. The Company’s laptop shipments worldwide in the quarter were
    up 11.3 percent year-over-year, helping Lenovo gain 2.6 share points and
    achieve a record-high laptop market share of 16 percent. Across the
    industry, laptop shipments were down seven percent year-over-year.
    Lenovo’s laptop  computers continued to be the largest contributor to the
    Company’s sales worldwide, generating 53 percent of Lenovo’s total sales
    revenue. Consolidated sales for Lenovo’s laptop PC business worldwide in
    the second fiscal quarter totaled US$4.6 billion, an increase of three
    percent year-over-year. During the second quarter, Lenovo announced a
    breathtaking array of new products: ThinkPad X1 Carbon, ThinkPad T430u
    ultrabook, and ThinkPad Tablet 2, the company’s first tablet specifically
    geared for Windows 8. Last month, Lenovo caught the industry’s attention
    with its announcement of three new convertibles, Yoga 13, Lynx and Twist,
    tablets that flip, twist, fold and separate, and are designed for Windows
    8.
  *Consolidated sales of Lenovo Desktop PCs worldwide increased five percent
    year-over-year in the second fiscal quarter to US$2.8 billion, or 32
    percent of Lenovo’s total sales revenue. The Company’s desktop PC
    shipments worldwide in the second quarter increased 8.8 percent
    year-over-year worldwide, compared to an overall industry decrease of nine
    percent worldwide. As a result, Lenovo gained 2.6 share points
    year-over-year and achieved a record-high market share of 15 percent.
    During the second quarter, Lenovo announced its new IdeaCentre A520, a new
    all-in-one desktop PC featuring a compact 23-inch frameless 1080p display
    that supports multi-touch with a widely adjustable screen angle (from -5
    to 90 degress flat) with perfect picture at any angle so users can watch
    movies, play touch-based games or enjoy video chat in any position.
  *Entering its second full year of operations, Lenovo’s Mobile Internet
    Digital Home (MIDH) group is forging ahead in leaps and bounds, with
    consolidated sales of US$718 million, a 155 percent increase
    year-over-year in the second fiscal quarter, and eight percent of the
    Company’s overall sales. With smartphones and tablets leading the
    Company’s PC Plus charge, Lenovo has continued to outpace the hyper-growth
    in shipments in China, and is now the second largest vendor in China in
    each of these product categories. Lenovo has gained an incredible 12.5
    share points in smartphones year-over-year in the second quarter for an
    overall market share of 14.2 percent in China. During the second quarter,
    Lenovo announced that it would begin selling smartphones in Indonesia,
    Philippines and Vietnam, and just last week, added India to the list.

ABOUT LENOVO

Lenovo (HKSE: 992) (ADR: LNVGY) is a US$30 billion personal technology company
– and one of the top two PC makers in the world -- serving customers in more
than 160 countries. Dedicated to building exceptionally engineered PCs and
mobile internet devices, Lenovo’s business is built on product innovation, a
highly-efficient global supply chain and strong strategic execution. Formed by
Lenovo Group’s acquisition of the former IBM Personal Computing Division, the
company develops, manufactures and markets reliable, high-quality, secure and
easy-to-use technology products and services. Its product lines include
legendary Think-branded commercial PCs and Idea-branded consumer PCs, as well
as servers, workstations, and a family of mobile internet devices, including
tablets and smart phones. Lenovo, a global Fortune 500 company, has major
research centers in Yamato, Japan; Beijing, Shanghai and Shenzhen, China; and
Raleigh, North Carolina. For more information see www.lenovo.com.

*See IDC data, 3Q 2012

FINANCIAL SUMMARY

                                                     
For the second quarter ended September 30, 2012

(in US$ millions, except per share data)
                                                          
                                         Q2     Q2     Y/Y
                                          12/13   11/12   CHG
Sales                                     8,672  7,786  11%
Gross Profit                              1,050  947    11%
Gross Profit Margin                       12.1%  12.2%  -0.1pts
Operating Expenses                        (844)  (781)  8%
Expenses-to-Revenue Ratio                 9.7%   10.0%  -0.3pts
Operating Profit                          206    166    24%
Other Non-Operating Expenses              (2)    (1)    47%
Pre-tax Income                            204    165    24%
Taxation                                  (41)   (20)   103%
Profit for the period                     163    145    13%
Non-controlling interests                 (1)    (1)    12%
Profit attributable to Equity Holders     162    144    13%
EPS (US cents)                                        
Basic                                     1.58   1.41   0.17
Diluted                                   1.55   1.38   0.17

Contact:

Lenovo Group
Hong Kong
Angela Lee, 852-2516-4810
angelalee@lenovo.com
or
Beijing
Ma Ling, (86) 10 5886-3525
maling@lenovo.com
or
U.S.
Ray Gorman, 919-257-6325
rgorman@lenovo.com