Emerging markets, cost trims buoy Lenovo profit
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Computer maker Lenovo Group yesterday posted a net profit for the second quarter, ending three straight quarters of losses, as robust demand from emerging markets and a series of cost saving measures helped negate the company's declining sales in mature markets.
Sales revenue of the world's fourth largest computer vendor during the July-September period declined 5 percent to $4.1 billion, but surged 19 percent compared with the previous quarter. Its worldwide shipments grew 17 percent year-on-year, beating the industry's average growth of 2.3 percent.
Yang Yuanqing, chief executive of Lenovo Group, said the company's share in the world PC market reached an all-time high of 8.9 percent in the second quarter, as its business in emerging markets and the consumer PC business saw rapid growth.
Lenovo's net income was $53.1 million in the quarter, compared with $23.4 million a year earlier.
Yang said the world showed signs of recovery in the quarter, but noted "corporate customers will not start replacing their personal computers until the second half of next year".
He said the company remains open to acquisition opportunities but that Lenovo was not in talks with any company.
Lenovo's business in developed markets such as the United States and Europe has been severely impacted by the economic slowdown, as corporate customers reduced their IT spending to save on costs.
In January, Lenovo said it would cut 2,500 jobs overseas. It later launched an overhaul of its business organization. The company said the reshuffle was expected to help it save $300 million in operating costs this year.
Yang said China was still Lenovo's largest profit generator, although the profit margin in the country's PC market was becoming flat due to fiercer competition. China contributed to 49 percent of the company's worldwide revenue in the second quarter, with sales increasing by 9 percent.
This year, Lenovo started to scale down its business in mature markets and intensified its presence in overseas emerging markets. Yang said that strategy was starting to take effect.
Lenovo's shipments in emerging markets increased 10 percent year-over-year, compared to an overall industry decline of 8 percent.
Yang said the company's consumer business, which accounted for 40 percent of its total revenue, surged 57 percent in the quarter. He said the launch of Microsoft's latest operating system Windows 7 was expected to significantly boost sales in the year to come.
The global PC market returned to growth mode during the July-September period, with shipments rising 2.3 percent compared with the same quarter last year, according to numbers released by market research firm IDC.
Yang said Lenovo's global market share was likely to cross 10 percent in the next few years.
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