Lenovo Profit Beats Estimates on Sales

Lenovo Group Ltd. (992), China’s biggest maker of personal computers, said second-quarter profit rose 88 percent, beating analysts’ estimates, after boosting sales to companies in the U.S. and gaining market share globally.

Net income climbed to $143.9 million, or 1.38 cents a share, from $76.6 million, or 0.76 cent, a year earlier, Lenovo said yesterday. Profit exceeded the $119.3 million average of eight analysts’ estimates compiled by Bloomberg.

The Chinese company shipped more PCs than Dell Inc. (DELL) last quarter after winning orders from U.S. businesses and boosting sales in China, the world’s biggest computer market. Chief Executive Officer Yang Yuanqing stepped up acquisitions this year to expand in Europe and Japan, and is diversifying into tablet computers and smartphones to compete with Apple Inc. (AAPL)

“Demand from corporate clients has been very strong,” said Roxy Wong, an analyst at Mirae Asset Securities in Hong Kong. Lenovo also increased sales to consumers in emerging markets such as India, said Wong, who rates Lenovo “buy.”

Lenovo rose 3.2 percent to close at an 18-month high of HK$5.78 in Hong Kong. The stock has gained 16 percent this year, compared with the 16 percent drop in the city’s benchmark Hang Seng Index.

Overtaking Dell

Revenue rose 35 percent last quarter to $7.79 billion.

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. The company’s lower prices don’t mean it’s “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 a statement yesterday.

The recent floods in Thailand may affect 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.

Legend IPO Plan

Yang will assume the dual role of chairman and CEO as founder and current Chairman Liu Chuanzhi steps down to focus on parent Legend Holdings Ltd., the company said. Legend is planning an initial public offering between 2014 and 2016, Lenovo said.

Yang served as Lenovo’s chairman from 2005 to 2009. Liu, who returned as chairman in February 2009 to help turn the company around during the global economic decline, will become “honorary chairman,” the company said.

Liu founded Lenovo in 1984 with a team of 10 scientists and 200,000 yuan ($31,500) in funding, the company said.

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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