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Lenovo Reports Global Profitability For First Fiscal Quarter

August 10, 2005
Business

Lenovo's (LNVGY) newly released results for its fiscal quarter ended June 30, 2005, show revenue up 234% to HK$19.6 billion from organic growth in emerging markets.

Pre-tax profit increased 54 percent to HK$515 million and profit attributable to shareholders was HK$357 million, an increase of 6 percent compared to the prior year's comparable period.

Basic earnings per share decreased 8 percent, to 4.12 Hong Kong cents, reflecting dilution related to the acquisition of the former IBM PC Division. Lenovo Group Limited results include two months of contributions from the acquisition, which was completed on April 30, 2005.

Lenovo's PC operations in China, the Americas and Europe and its mobile handset business were profitable; Asia Pacific PC operations (excluding Greater China) showed a small loss.

The Group reported HK$18.3 billion in turnover in its global PC business. Lenovo's PC shipments were up 7 percent year-to-year and 14 percent quarter-to-quarter, the highest comparable quarter of PC shipments on record, based on industry reports.

In Greater China, Lenovo's consolidated turnover was HK$7.9 billion and the segment reported HK$463 million in operating profit. Lenovo's PC leadership in the China market and in Asia increased, with the company maintaining its number-one market share position in China with share gains year-to-year and sequentially, and regaining its PC market share leadership in Asia Pacific overall (excluding Japan), according to industry reports.

Globally, Lenovo outperformed the industry in key emerging markets. According to industry reports, Lenovo delivered year-to-year shipment growth of 35 percent in India, 58 percent in Brazil, 50 percent in Russia, and 24 percent in Greater China.

In May and June, Lenovo's turnover in the Americas was HK$5.5 billion and the segment reported HK$249 million in operating profit. In the Europe, Middle East and Africa (EMEA) region, turnover was HK$3.7 billion, with HK$40 million in operating profit. The company noted that quarter-to-quarter, shipments increased in both regions, citing industry reports of sequential shipment growth of 4 percent in the Americas and 10 percent in EMEA. In both regions, despite competitive pricing pressure, Lenovo's margins showed strength.

Lenovo's turnover in Asia Pacific (excluding Greater China) was HK$2.5 billion for May and June, with the unit reporting an operating loss of HK$29 million. Industry reports indicated that quarter-to-quarter shipments were up slightly. Lenovo noted that its performance was strong in India with some weakness in Japan.

Total turnover for Lenovo's notebook PC business was HK$9.3 billion. Globally, Lenovo's commercial notebook market share increased quarter-to-quarter, as enterprise buying for ThinkPads gained momentum. The company noted that response to the new x41 Tablet PC has been excellent. In China, strong performance came from notebook adoptions by high-end consumers.

Lenovo's turnover in its global desktop business was HK$9.1 billion. In China, Lenovo's customer segmentation strategy is capturing the growth potential in the township markets with its Jiayue desktop series, and resulted in an estimated 5 percent share increase. Lenovo also enjoyed good growth in its commercial PC shipments, benefiting from the relationship customer model it set up in the previous year and from response to the introduction of the Yangtian desktop for the SMB market.

Turnover in Lenovo's mobile handset business, conducted primarily in China, increased by 27 percent to HK$820 million. Lenovo's mobile handset unit shipments jumped 51 percent, increasing its share and moving the brand to sixth place in China. With shipments of more than one million mobile handsets for the quarter and good expense controls, Lenovo's mobile handset business delivered HK$25 million operating profit this quarter.

Tags: acquisition | Africa | ASIA | Asia Pacific | brand | Brazil | Business | China | customer | desktop | enterprise | Europe | Greater China | handset | Hong Kong | ibm | India | Japan | Lenovo | Middle East | mobile | Pacific | PC | revenue | Russia

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