LI, Tao @ Hong Kong

A worker unloads Lenovo computers from a tricycle at a computer market in Beijing. The company attributes the best quarterly result in more than two years to double-digit sales growth in developing economies. Nelson Ching / Bloomberg

China’s top PC maker reports profit of $99.7m in Q3 ending Dec 31

Lenovo Group Ltd, China’s biggest maker of personal computers, said Thursday its fiscal third-quarter profit rose 25 percent on the back of lower component costs and strong sales growth in emerging market.

Net profit for the three months ended Dec 31 was $99.7 million, up from $79.5 million during the same period a year earlier. The better-than-expected result beats the estimated $86.85 million forecast of analysts polled by the Wall Street Journal and the $86.1 million prediction compiled by Bloomberg.

The best quarterly result in more than two years was mainly due to double-digit sales growth in developing economies – including on the Chinese mainland – as well as in the US and Europe where consumers are replacing their old machines, the company said.

Sales in its home mainland market were up 18 percent compared with a year earlier at $2.7 billion, according to the personal-computer maker, adding that its market share on the mainland has reached a record 32.2 percent, up 2.4 percentage points from a year earlier. Its marketshare also growing at three times the industry average.

In the global market, Lenovo reported market share of 10.2 percent, up about 1.5 percentage points compared with the same period last year.

Sales in other developing markets excluding the mainland increased 34 percent to $1.1 billion, while they increased 22 percent to $2 billion in the US and Europe.

Yang Yuanqing, Lenovo’s chief executive officer, described the growth as “faster than any of the top five PC manufacturers” in the world, citing its worldwide shipments of PCs increasing 20.6 percent year-on-year in the third quarter compared with the industry average of 3.4 percent .

“Lenovo now owns double-digit market share in 15 countries, among which 13 are emerging markets,” Yang told reporters in a conference call Thursday. “PC shipments across emerging markets increased 43 percent year-on-year in the third quarter, almost triple the overall industry’s 16 percent increase in the region.”

However, operating losses in emerging markets widened to $13 million in the third quarter compared with a $6 million loss last year. Yang said this was mainly due to promotional activities in the region in a bid to seize more market share.

“It was not realistic to talk about profits before we achieved double-digit share in an emerging market,” said Yang. He cited India as an example, which reached 10.3 percent market share in the quarter for the first time and contributed about $3 million profit to the group.

Yang also sees a “short-term” slowdown in mainland’s PC market, but he is “optimistic” about its long-term growth.

Nevertheless, with the market penetration of PCs in smaller centers on the mainland at low rates compared with mature economies – at about only one-fifth the size of the US – Yang added that the group is more confident about expanding its business opportunities in those areas.

Lenovo shares rose HK$0.16 or 3.36 percent to close at HK$4.92 in Hong Kong trading Thursday.

“Investors may also uphold Lenovo’s share price in the long run as apart from its traditional PC market, new products such as LePhone and LePad – which competes with Apple Inc’s iPhone and iPad – are also likely to draw considerable market share in the future,” Alvin Chung, associtate director with Prudential Brokerage, told China Daily.

Lenovo’s Chief Operating Officer Rory Read also said Thursday he expects tablet computers to account for 10 percent to 15 percent of the PC market. Sales of the smart-phone LePhone reached 230,000 in the third quarter, double that of the previous quarter, according to the group.

On Jan 27, Lenovo announced it had agreed to invest $175 million to form a venture with NEC Corp to expand in the Japanese market. NEC and Lenovo together accounted for about 26 percent of Japan’s PC market, according to Lenovo’s Chief Financial Officer Wong Waiming.

A JPMorgan report published the same day said it is overweight on Lenovo as “consolidation is positive for the industry as well as Lenovo”, and it expects better cost structure for Lenovo due to increased scale.

China Daily

(HK Edition 02/18/2011 page2)

http://www.chinadaily.com.cn/hkedition/2011-02/18/content_12035971.htm