Lenovo Group Ltd. (992), the world’s largest maker of personal computers, reported a 25 percent jump in fourth-quarter profit as its desktop models and mobile devices gained global market share.
Net income climbed to $158.3 million in the three months ended March from $126.9 million a year earlier, the company reported today. That compared with the $163.6 million average of nine analysts’ estimates compiled by Bloomberg.
Chief Executive Officer Yang Yuanqing has maintained Lenovo’s leadership in the PC market at a time when industrywide shipments have contracted, and he also is expanding sales of smartphones overseas. Lenovo, which in January agreed to buy Motorola Mobility for $2.9 billion, plans to triple the number of countries where it sells phones by adding 20 new markets in the Middle East, Africa and Latin America.
“The company has always been competitive, be it PCs and mobility,” Dennis Lam, an analyst with DBS Vickers Hong Kong Ltd., said in an e-mail. “The PC market has somewhat stabilized in the face of cannibalization from tablets and smartphones. The smartphone side has become more challenging as competition heats up from low end smartphones, especially in China.”
Lenovo’s sales climbed to $9.4 billion from $7.83 billion a year earlier. That beat the $9 billion average of 21 analysts’ estimates compiled by Bloomberg.
Lenovo rose 3.4 percent, the most since April 10, to HK$9.44 at the close in Hong Kong trading. The stock has gained 0.1 percent this year, compared with the 2 percent drop in the city’s benchmark Hang Seng Index.
While global PC shipments dropped 1.7 percent in the three months ended March, Lenovo expanded market share as sales rose 11 percent, market researcher Gartner Inc. reported last month.
Lenovo, which has its headquarters in Beijing and Morrisville, North Carolina, maintained the No. 1 spot in the PC market in the period with 17 percent of shipments, while Hewlett-Packard Co. (HPQ) was second with 16 percent, Gartner said.
Lenovo’s smartphone shipments jumped 63 percent in the period to 12.9 million units, researcher International Data Corp. reported last month. That lifted its global market share for the devices to 4.6 percent, from 3.6 percent a year earlier, IDC said.
As the company continues to gain scale with market share wins in PCs, smartphones and tablets, that will further boost profitability, Yang said in a telephone interview today.
“There is definitely potential to further improve margins,” Yang said. “That is still our commitment.”
Yang plans to keep the smartphone business growing in part through acquisitions. In January, the company announced plans to buy Google Inc. (GOOG)’s Motorola Mobility handset unit for $2.91 billion in cash and stock.
Yang also is expanding in other types of hardware and in January announced plans to buy International Business Machines Corp. (IBM)’s low-end server unit for $2.3 billion. The purchase will add a business with wider profit margins than PCs and give it about 14 percent of that market.
Both transactions are in the process of getting U.S. government approval Yang said, without giving further details.
“We will cooperate with the government closely to make sure we can get the approval,” he said. “We are OK with that.”
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