Len­ovo re­ports quar­terly rev­enue tops $10 bil­lion

It’s the first time the PC ven­dor has bro­ken through the mile­stone

China Daily (Canada) - - BUSINESS - By GAO YUAN gaoyuan@chi­nadaily.com.cn

Len­ovo Group Ltd on Thurs­day re­ported its quar­terly rev­enue broke through the $10 bil­lion bar­rier for the first time be­cause of strong global de­mand. Top ex­e­cut ives also ex­plained to share­hold­ers how they are go­ing to max­i­mize profit gains from the re­cent ac­qui­si­tions that cost Len­ovo more than $5 bil­lion.

The world’s largest per­sonal com­puter ven­dor said the rev­enue in its third fis­cal quar­ter that ended on Dec 31, 2013, stood at $10.8 bil­lion, a jump of 15 per­cent year-on-year.

Earn­ings also surged 30 per­cent com­pared with a year ago to $265 mil­lion.

Yang Yuan­qing, chair­man and chief ex­ec­u­tive of­fi­cer of Len­ovo, said busi­ness in PC-plus ar­eas, in­clud­ing smart­phones, tablets and servers, was driv­ing profit growth.

“The Mo­torola (Inc) and IBM (Corp) server ac­qui­si­tions are a per­fect fit with our PC­plus strat­egy,” said Yang.

He also tried to calm in­vestors who were ques­tion­ing the com­pany’s prof­itabil­ity af­ter spend­ing $3 bil­lion to ac­quire the money-bleed­ing Mo­torola Mo­bil­ity from Google Inc. Mo­torola Mo­bil­ity makes An­droid smart­phones and Blue­tooth ac­ces­sories. Yang said the busi­ness will quickly be­gin con­tribut­ing to the com­pany’s per­for­mance.

But Yang was hes­i­tant to es­ti­mate his com­pany’s earn­ings prospects, say­ing the two ac­qui­si­tions are still await­ing ap­proval from the United States govern­ment. Con­se­quently, the ef­fect on short-term earn­ings are dif­fi­cult to pre­dict.

“Buy­ing Mo­torola is a quicker way for Len­ovo to ac­cess the pre­mium smart­phone mar­ket with a leading An­droid of­fer­ing than try­ing to do it with its ex­ist­ing de­sign teams and brand reach,” said Frank Gil­lett, vice-pres­i­dent and prin­ci­pal an­a­lyst at For­rester Re­search.

“Us­ing Mo­torola, just as Len­ovo used the IBM ThinkPad brand, to gain quick cred­i­bil­ity and ac­cess to de­sir­able mar­kets and build crit­i­cal mass, makes a lot of sense,” added Gil­lett.

Sun Qi, vice-pres­i­dent of in­dus­try con­sul­tancy Si­noMar­ket Re­search Ltd, also be­lieves the Mo­torola unit will ex­tend the Chi­nese com­pany’s per­for­mance in global mar­kets.

Len­ovo was the sec­ond­largest smart­phone maker in China last year with more than 40 mil­lion ship­ments, ac­cord­ing to Sun.

Len­ovo’s quick move into por­ta­ble de­vice mar­kets has given the com­pany an up­per hand in fu­ture com­pe­ti­tion, an­a­lysts said.

In the past quar­ter, Len­ovo’s rev­enue surged in Europe, the Mid­dle East and the Amer­i­cas. Sales out­side China con­trib­uted more than 60 per­cent in rev­enue, ac­cord­ing to its fi­nan­cial re­port.

“Len­ovo was early to em­brace An­droid as a tablet op­er­at­ing sys­tem while the likes of HP (Hewlett-Packard Co) and Dell (Inc) waited for Win­dows 8 and pri­or­i­tized mar­gins over vol­ume,” said James Wang, an an­a­lyst at Canalys.

“Len­ovo’s strat­egy has paid off, not only in its home mar­ket but world­wide. Len­ovo still has the po­ten­tial to grow its global note­book ship­ments and has emerged as a chal­lenger in the tablet space,” added Wang.

The an­a­lyst said Len­ovo shipped three times as many tablets world­wide in the past quar­ter as HP and Dell com­bined.

Len­ovo CEO Yang said ear­lier the com­pany will chal­lenge Sam­sung Elec­tron­ics Co and Ap­ple Inc glob­ally, us­ing a big­ger prod­uct spec­trum and more af­ford­able prices.

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