Lenovo posts increased profits in second quarter

PC maker generated a better-than-expected 13 percent increase in profits on revenue that once again outpaced the market

dranii@newsobserver.comNovember 8, 2012 

Lenovo's upcoming IdeaPad Yoga 13 features an innovative 360-degree hinge that enables you to fold the device for ease-of-use when you switch from laptop to tablet mode.

LENOVO

PC maker Lenovo generated a better-than-expected 13 percent increase in profits on revenue that once again outpaced the market.

“We are gaining share and are improving profitability at the same time,” CEO Yang Yuanqing told analysts during a conference call Thursday. “This is our long-term formula for success.”

Net income for the quarter totaled $162 million, or $1.58 per share. Analysts polled by Bloomberg News had projected that net income would be $158.4 million. Revenue totaled $8.67 billion – up 11 percent.

Although Lenovo’s results for its second fiscal quarter that ended in September are robust relative to those of its competitors, the pace of its revenue and profit growth sagged compared to recent quarters as the worldwide market for PCs struggled. In the prior quarter, revenue jumped 35 percent.

Lenovo is based in China but has an executive headquarters in Morrisville that employs about 2,000 workers. The company also recently announced plans to manufacture PCs in the United States by adding a production line employing 115 newly hired workers at its distribution center in Guilford County.

Last month, research firm Gartner reported that Lenovo moved into the No. 1 spot with a 15.7 percent market share in the worldwide PC market, edging out Hewlett-Packard. But by research firm IDC’s reckoning, HP held onto the No. 1 spot by a thin margin. In the United States, both research firms rank Lenovo No. 4 with more than an 8 percent market share.

The company’s meteoric rise – it was ranked No. 7 worldwide four years ago – has been marked by 12 consecutive quarters of being the fastest-growing major producer of PCs. The company has enjoyed strong internal growth thanks to attractive products and aggressive pricing. That growth has been supplemented by strategic acquisitions, such as its recent purchase of a consumer electronics maker in Brazil for at least $147 million in cash.

Yang expressed optimism that the recent introduction of Microsoft’s Windows 8 operating system presents a growth opportunity. Last month the company unveiled a slate of Windows 8 “convertibles” that function as laptops as well as tablets, and Yang said that two of those products – the ThinkPad Twist and the IdeaPad Yoga – are off to a promising start.

“Already, our large retail partners have told us that Yoga and Twist are their top Windows 8 devices in pre-sales,” he said.

The company also has been expanding into the smartphone and “smart TV” markets, but those products aren’t available to U.S. consumers. Its division that makes mobile devices posted a 155 percent increase in sales, accounting for 8 percent of overall revenue.

Lenovo smartphones previously were sold only in China, but they recently became available in India, Indonesia, the Philippines and Vietnam.

Lenovo’s American depositary receipts, akin to common stock, closed Thursday at $16.94, down 27 cents. Its ADRs have risen 29 percent this year.

Ranii: 919-829-4877

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