Lenovo profit jumps as smartphone push pays off

PC maker Lenovo Group booked a forecast-beating 23 per cent jump in April-June net profit to deliver its second-best quarterly earnings, as its push into smartphones and tablets begins to bear fruit.

With the traditional PC sector on the decline, Lenovo has accelerated its foray into mobile devices, rapidly rising to become the number two smartphone vendor in China, the world’s largest smartphone market. It is also expanding into other emerging economies and has said it will start selling phones in the United States, perhaps this year.

Lenovo, which toppled Hewlett-Packard in PC rankings this year, posted a net profit of $174 million in the quarter ended June, beating a consensus estimate of $166.0 million.

It overtook ZTE as the world's number four smartphone maker in April-June with market share of 4.7 per cent, behind Samsung Electronics, Apple and LG Electronics, according to research firm IDC.

As sales of its LePhones and tablet PCs gain traction, margins are expected to improve and revenue from its mobile internet and digital home (MIDH) unit is set to rise to 25 per cent in its fiscal year ended March 2015 from 16 per cent in the year ended March 2013, analysts have said.

Overall quarterly revenue for the ThinkPad maker rose 9.7 per cent to $8.8 billion.

Its gross profit margin for the quarter was up 0.5 percentage points from 13.1 per cent a year earlier, it said in a statement on the Hong Kong stock exchange.

Lenovo quickly gained market share in PCs on the back of a string of acquisitions and speculation is rife that it will do the same to expand further in smartphones and tablets. It has been mentioned as a possible partner for HTC Corp and as potentially interested in BlackBerry, which is exploring a sale of itself. (Reuters)