Lenovo's profits jump 36 percent

dranii@newsobserver.comNovember 7, 2013 

Johana Garcia Guardado (left) and Robin Strader assemble personal computers at Lenovo's new manufacturing plant in Whitsett. The company's expansion generated 115 new jobs in Guilford county and the surrounding area.

KATHERINE BLUNT — kblunt@newsobserver.com Buy Photo

No. 1 computer maker Lenovo bested analysts’ expectations with a 36 percent jump in quarterly profit fueled by its growing share of the global PC market and its increasingly successful diversification strategy.

“This definitely proved that our ‘PC Plus’ strategy is working very well,” CEO Yang Yuanqing said in a conference call with analysts. “We are confident that we can sustain this momentum quarter after quarter.”

PC Plus is what Lenovo calls its strategy of diversifying into other devices such as smartphones and smart TVs. Lenovo doesn’t yet sell those products in the U.S. but intends to introduce them here by the end of 2014.

Lenovo’s mobile Internet and digital home products, which includes smartphones, smart TVs and tablets, accounted for 15 percent of total revenue compared to eight percent a year ago.

“The better profit is due partly to its smartphone business and cost control,” HSBC Holdings analyst Jenny Lai told Bloomberg News in an e-mail.

Lenovo reported Thursday that revenue rose 13 percent to $9.8 billion in the fiscal second quarter that ended Sept. 30. Analysts polled by Bloomberg News had been expecting, on average, revenue of $9.41 billion.

Net income totaled $220 million, up from $162 million a year ago. Analysts were projecting $202.7 million in net income.

Lenovo is based in China and has a headquarters in Morrisville, where it employs 2,200 workers.

Despite Lenovo’s prosperity, in May and again in October the company laid off what it described as a “small number of employees” in Morrisville.

Company spokesman Ray Gorman noted in the wake of last month’s layoffs, which he attributed to the company’s diversification strategy, that Lenovo has been steadily expanding its work force across North Carolina.

“We will continue to hire in North Carolina, particularly in the higher-growth areas of our business, such as PC Plus,” Gorman said at the time.

Lenovo’s worldwide PC shipments have outpaced the industry for 18 consecutive quarters, and for the past two quarters it has been the undisputed market leader. But in the third quarter its PC shipments rose just 2 percent, according to market research firms IDC and Gartner, because the overall market sagged.

Lenovo ranks No. 4 in the U.S. PC market. It entered the U.S. market in 2005 when it acquired IBM’s PC business.

Yang said he expects the PC market to improve over the next few quarters and also sees the expanding tablet market “shifting to our favor.”

Lenovo ranks No. 4 in tablets – behind Apple, Samsung and Asus. In the third quarter it shipped 2.3 million tablets globally, up from $1.5 million in the second quarter and a scant 400,000 units in the year-ago quarter, according to IDC.

Lenovo’s American depositary receipts, which are akin to common stock, were trading at $22.11 Thursday morning, up 36 cents. Its ADRs have risen 21 percent this year.

Ranii: 919-829-4877

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