Lenovo, which just became the undisputed leader in the worldwide computer market, posted better-than-expected second-quarter results despite a sagging PC market.
Paradoxically, however, the growth the company reported Thursday was fueled by sales of smartphones and tablets, which doubled their sales volume from a year ago and accounted for 14 percent of total revenue. For the first time, the company sold more smartphones and tablets in terms of units than PCs.
The company is transforming itself from PC-based to smartphone- and tablet-based, analyst Ricky Lai of Guotai Juan International Holdings in Hong Kong told Bloomberg News. There is robust demand for tablets and smartphones, especially in China and emerging economies.
Lenovo smartphones arent yet sold in the U.S. but Jay Parker, the companys president of North American operations, said in an interview that the company remains on track to introduce them by the end of 2014.
Im very eager to start selling smartphones, but we have to make sure were prepared so we can hit the ground running when the products make it here, Parker said.
Parker noted that Lenovo is the worlds fourth-largest smartphone maker and just a couple of tenths of a point from No. 3, which a lot of people here in North Carolina probably dont know. The company also is No. 5 in worldwide tablet sales.
Lenovo is based in China but has a headquarters in Morrisville, where it employs 2,200 workers up from 1,500 at the beginning of 2010.
In the second quarter Lenovo generated $8.79 billion in revenue, up 10 percent and ahead of the $8.49 billion anticipated by analysts polled by Bloomberg. Net income rose 23 percent to $174 million, versus analyst estimates of $167 million.
Especially in a PC market that is struggling a little bit, we couldnt be happier, Parker said.
Worldwide PC shipments have fallen for five consecutive quarters, including a 10.9-percent drop in the second quarter, according to market research firm Gartner Group. But Lenovos worldwide market share fell a scant six-tenths of a percent, enabling it to vault ahead of rival HP with a record 16.7 percent market share.
In the U.S. market, Lenovo was No. 4 in PC shipments in the U.S. market with a 10.1-percent market share after expanding 19.7 percent.
Parker said that the company expects to sell hundreds of thousands of tablets in the U.S. market over the next 12 months after sales grew in triple digits in the second quarter.
Its not an insignificant amount, he said. Still a relatively low (market) share, but growing fast. Lenovo tablets arent ranked in the top five by market research firms Gartner and IDC, which dont specify market share numbers beyond the leader.
Tablets, Parker said, are very user-friendly, relatively inexpensive ways to both find information and entertain yourself. Our products are designed to be very thin and light, very long battery life, very easy to use and very rugged. We have found that to be a winning combination so far.
Lenovos stock-like American depositary receipts closed Thursday at $19.82, up 20 cents. Its ADRs have risen 8 percent this year.