Lenovo’s profit leaps 54% on market gains

Lenovo’s profit jumped 54%, as it extended its market share in China and the US.

Lenovo’s financial results over the past few quarters have been strong, mainly propelled by an increase in global market share following the acquisition of Germany’s Medion and a joint venture deal with NEC, and strong sales from emerging markets such as China.

“The overall PC growth is not that exciting, but why we like Lenovo is really, purely based on its ability to gain market share,” said Jonathan Ng, an analyst with CIMB Research in Singapore.

Lenovo’s performance in China was a strong point, with the country making up 42% of Lenovo’s total sales, while it also gained in the US.

The United States for example, has gained market share as some commercial PC users switched to Lenovo given concerns over HP’s management and strategy

“It is also doing pretty well in certain mature markets. The United States for example, has gained market share as some commercial PC users switched to Lenovo given concerns over HP’s management and strategy,” Jenny Shih, an analyst with Daiwa CapitalMarkets in Taipei.

Lenovo reported a net profit of $153.46 million for the three months ended December, up 54% from $99.65 million a year earlier. Third-quarter revenue rose 44% from a year earlier to $8.37 billion.

Analysts said Lenovo, which last year edged out Dell to rank behind market leader HP in PC sales, needs to increase market share in the fast-growing tablet and smartphone sectors as traditional PCs and laptops have become commoditised.

Smartphones and tablets

The company has been diversifying into smartphones and tablets with its LePhone and LePad devices, although market share still lags that of major players such as Apple, Samsung and Chinese companies Huawei and ZTE.

In the last fiscal quarter, Lenovo shipped 400,000 tablets globally and 6.5 million handsets, including smartphones, executives said. Lenovo is now the No.2 tablet provider in China, ranking behind Apple.

“For tablets, there isn’t a big contender out there to compete with Apple (globally),” CIMB’s Ng said. “If you look at China, Lenovo’s brand name is pretty strong.”

Lenovo has also launched an online application store called LeGarden and showcased its first smart TV running Google’s Android operating system “Ice Cream Sandwich” in a bid to boost its brand in the sector.

The company said it would launch its smart TV in April, but said the TVs would be sold only in China at the beginning because the company needs to line up content providers and carriers before expanding sales globally.

Despite its moves into other sectors, PCs will remain the company’s main business.

“We will continue to focus on traditional PCs,” CEO and chairman Yang Yuanqing said. “We want to win in this market until we become the leader. I believe traditional PCs will continue to be our core business.”