August 16, 2012
Lenovo executives hold the new ThinkPad X1 Carbon laptops in Beijing Monday, Aug. 6, 2012. Photo: Alexander F. Yuan/AP
The Lenovo Group, the world's No.2 PC maker by sales, posted a 30 per cent rise in quarterly net profit, beating analysts' forecasts, though it logged its slowest growth in 18 motnhs mainly due to lackluster demand in some emerging markets and North America.
The ThinkPad maker has been advancing on the global PC stage due to aggressive pricing, overseas acquisitions and a fast-growing home market, but rapid gains in market share have come at the expense of thin profit margins.
Lenovo also faces slowing growth in the market for personal computers and tough competition from the likes of Apple and Samsung in the fast-growing tablet PC and smartphone space. Last week it launched a new version of the ThinkPad laptop to compete with thinner, lighter devices and a new version of the ThinkPad Tablet.
"Although challenges to worldwide PC demand remain largely due to weakening economic condition, Lenovo remains both optimistic about the future of the PC market and committed to innovation," Lenovo said in a statement.
The company added that it would grow faster than the worldwide PC market and is on track to become the leader in the PC industry.
Lenovo, which ranks behind HP in PC sales, posted a net profit of $US141.4 million for its April-June first quarter, up from $US108.8 million from a year earlier, it said in a statement on the Hong Kong stock exchange on Thursday.
The net profit growth was the slowest since the third quarter of fiscal 2010/2011, when the pace was about 25 per cent, based on previously announced data.
Still, the result was better than an average forecast of $US131.2 million in a poll of 10 analysts by Thomson Reuters I/B/E/S.
Lenovo's profit margin has been lagging those of rivals such as Dell. Its gross profit margin was down 0.5 percentage point in the first quarter from 12.5 per cent a year earlier due to price competition in emerging markets and China.
In the first quarter, operating profit in North America was $US46 million, down from an operating profit of $US52 million a year earlier, Lenovo said.
Lenovo, which became the world's No.2 PC vendor in the third quarter of 2011, is just a sliver from overtaking HP as the top PC maker globally.
In the April-June quarter, Lenovo had a 14.9 per cent global market share, just 0.6 percentage point away from HP's 15.5 per cent, research firm IDC said.
Figures from industry tracker Gartner show an even narrower gap, with Lenovo just 0.2 percentage point from HP.
The booming Chinese market has been its main revenue driver, contributing around 42 per cent of its total revenue.
A series of deals, including acquiring Germany's Medion and forming a joint venture with Japan's NEC last year, as well as its acquisition of IBM's PC business in 2005, also helped Lenovo gain market share.
Its acquisition record has sparked rumors that it may try to acquire troubled handset makers such as Nokia and BlackBerry maker RIM, though Lenovo has so far denied such plans.
The results came before Hong Kong markets opened on Thursday.
Lenovo shares have climbed about 20 per cent so far this year, outpacing rivals such as HP, Dell and Acer.