Lenovo reports quarterly profit above expectations

LENOVO GROUP, the world’s number two PC maker by sales, reported a better-than-expected quarterly profit, pushing its shares to a seven-week high. However analysts warned a slower Chinese economy could cut into its performance.

The ThinkPad maker, close to overtaking Hewlett Packard for the top spot, has risen quickly on the global PC stage due to aggressive pricing, overseas acquisitions and a fast-growing home market.

These rapid gains in market share, however, have come at the expense of margins, with profits growing at their slowest pace in more than a year.

Lenovo, with a market value of $8.2 billion, also faces slowing growth in the market for personal computers and tough competition from the likes of Apple and Samsung Electronics in the fast-growing tablet PC and smartphone space.

“In China for sure they are also affected because as a whole, the Chinese market has softened,” said Jonathan Ng, an analyst at CIMB in Singapore.

The booming Chinese market has been Lenovo’s main sales driver, contributing 42 per cent of its total revenue, but the outlook is overshadowed by slowing growth that has sapped demand and led to a series of profit warnings by Chinese firms.

Lenovo’s unit shipments in China grew 9 per cent in the first quarter compared with a year earlier, outpacing a decline of 3 per cent in the overall China PC market.

The company expressed confidence it would grow faster than the worldwide PC market, and was on track to become the leader in the PC industry.

“China’s macro-economy has shown some uncertainty because of real estate bubble controls and weak exports...but from a long-term point of view I’m still very optimistic,” said chairman and CEO Yang Yuanqing.

Lenovo posted a net profit of $141.4 million for its April-June first quarter, up 30 per cent from $108.8 million a year earlier.

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, mainly due to lacklustre demand in some emerging markets and North America. – (Reuters)