Lenovo Quarterly Profit Rises 90% on Market Share Gains

Lenovo Group Ltd. (992), the world’s second-biggest maker of personal computers, reported a 90 percent gain in fourth-quarter profit after increasing its market share and boosting smartphone sales.

Net income climbed to $126.9 million in the three months ended March, from $66.8 million a year earlier, Lenovo said in a statement today. That beat the $108.1 million average of eight analysts’ estimates compiled by Bloomberg.

Lenovo is developing mobile devices such as smartphones and tablets as it seeks to lure customers from Apple Inc. (AAPL) and Samsung Electronics Co. and weather a global slump in demand for PCs. The company maintained PC sales and expanded market share in the quarter, even as global shipments dropped 13.9 percent, researcher International Data Corp. reported in April.

“Somebody over there is doing something right,” Alberto Moel, an analyst at Sanford C. Bernstein & Co. in Hong Kong, said by telephone. “The size of the beat is quite solid. They did better margins everywhere, with material expansion in PCs in Europe, Middle East and Africa as well as North America, while the smartphone business also continued to improve.”

Revenue rose 4.5 percent to $7.83 billion. That compares with the $7.98 billion average of 14 estimates compiled by Bloomberg.

Photographer: Tomohiro Ohsumi/Bloomberg

A woman talks on a mobile phone in front of an advertisement for Lenovo Group Ltd. in Beijing. Close

A woman talks on a mobile phone in front of an advertisement for Lenovo Group Ltd. in Beijing.

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Photographer: Tomohiro Ohsumi/Bloomberg

A woman talks on a mobile phone in front of an advertisement for Lenovo Group Ltd. in Beijing.

Lenovo, which has its headquarters in Beijing and Morrisville, North Carolina, rose 2.8 percent to close at HK$7.38 in Hong Kong. The stock has climbed 5.1 percent this year, surpassing the 0.1 percent gain for the city’s Hang Seng Index.

Increased Share

Lenovo was the only one of the top five vendors to avoid a decline in PC shipments, and boosted its share of the global PC market to 15.3 percent in the period, from 13.2 percent a year earlier, as the company “continues to execute on a solid ‘attack’ strategy,” IDC said in the April report.

Lenovo narrowed the gap with market leader Hewlett-Packard Co. (HPQ), which saw its share fall to 15.7 percent from 17.7 percent, according to IDC.

“We have a strong PC business foundation that we are confident will be even stronger and more profitable in the year ahead,” Lenovo Chief Executive Officer Yang Yuanqing said at an earnings conference today. “At the same time, we are now much more than a PC company.”

Lenovo introduced touchscreen handsets in Russia, India, Indonesia, Vietnam and the Philippines last year following the debut of its first model in China in 2010. The company this month said it will introduce its first smartphones in Africa, with a release planned for Nigeria before the end of the year.

Servers, Storage Devices

The company cemented its position as the second-largest smartphone vendor in China, behind Samsung, by more than tripling shipments in the quarter, Lenovo said today. The Mobile Internet Digital Home unit that sells handsets boosted total sales 74 percent to $736 million in the period, while profitability “continued to improve,” the company said.

Lenovo seeks to be the smartphone market leader in China, and will “aggressively” expand in emerging markets, Yang said. The company’s smartphone shipments this year will rise 72 percent to 50 million units, from 29 million last year, he said.

Tablet shipments this year will rise to 10 million units, from 2.2 million last year, according to the CEO.

Lenovo also plans to become a “relevant global player” in servers and storage devices within three years, Yang said.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

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

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