2nd UPDATE: Lenovo 4th Quarter Profit Up 59%; Outpaces Industry Growth
May 23 2012 - 6:19AM
Dow Jones News
BEIJING (Dow Jones)--Lenovo Group Ltd. (0992.HK) said Wednesday
its net profit for the fiscal fourth quarter rose 59% from a year
earlier as its personal computer sales outpaced industrywide sales,
and the company is confident the growth momentum will continue as
it is aggressively pursuing new opportunities in mobile
devices.
Lenovo is China's largest PC maker by shipments and by far the
fastest growing of the world's top PC makers, with its
profitability outpacing rivals Dell Inc. (DELL) and Hewlett-Packard
Co. (HPQ) as the Chinese firm has targeted fast-growing emerging
markets while Dell and HP have revamped their businesses to move
away from low-margin PC production. The global PC industry has
taken a hit in recent years as users have increasingly traded their
computers for smartphones and tablets.
Lenovo's net profit for the three months ended March 31 was
US$67 million, up from US$42 million a year earlier. Revenue rose
54% to US$7.5 billion from US$4.9 billion.
In the last month, Lenovo's shares have fallen more than 7% due
to concerns about the slowing global and Chinese economies, but
Chief Executive Yang Yuanqing said a slowdown in China wouldn't
have a major impact on Lenovo, which holds a 30% market share of
the Chinese PC market.
"China is an emerging market. In front-line cities, the market
is saturated, (so) we are aggressively developing tier 2 and tier 3
cities. Computer penetration in these cities is still low, so
that's why there's still room for growth," he said.
The strong profit growth by Lenovo, which bought International
Business Machines Corp.'s personal computer business in 2005, comes
after Dell said Tuesday its profit fell 33% from a year earlier in
the fiscal quarter ended May 4, missing forecasts. Hewlett-Packard
Co. is also hurting, with analysts expecting the company to outline
plans to lay off as many as 30,000 workers when it reports earnings
Wednesday.
However, despite the rise in net profit, analysts still say they
were concerned about falling margins after the company's gross
margin fell to 10.8% in its fiscal fourth quarter from 12.3% a year
earlier. Bernstein Research analyst Alberto Moel said that as
Lenovo has grown in scale, profitability hasn't necessarily kept
pace.
He also said the company is "way behind on profitability" in its
mobile business, which raises questions about its plans to expand
aggressively into the growing mobile device market.
Lenovo said that in its fiscal fourth quarter, PC shipments in
China rose 22.7% from a year earlier, while those in other emerging
markets grew 50%, with a strong showing in India and Russia. PC
shipments in mature markets increased 81%.
The company declared a final dividend of HK$0.10 for its last
fiscal year, compared with HK$0.05 a year earlier.
-By Paul Mozur, Dow Jones Newswires; 86 10 8400 7702;
paul.mozur@dowjones.com