Beijing: Lenovo Group, the world’s No. 4 personal computer maker, reported quarterly profit up 198% on Thursday and forecast strong sales this year despite a possible US economic slowdown.
Driven by strong sales and aggressive cost-cutting, profit for the three months ending 31December were $172 million on revenues of $4.6 billion, Beijing-based Lenovo said.
That was below the average $253.5 million in third-quarter profit expected by analysts polled by Dow Jones Newswires. Earnings per share were $1.93.
In 2008, Lenovo expects double-digit sales growth despite a possible US slowdown, due to its bigger presence in faster-growing markets such as China and India, said CEO William J. Amelio.
“We have such a good base in other geographies, we have a great way to insulate ourselves from some of the downturn that may occur in the United States,” Amelio said in a conference call with analysts.
Also this year, Lenovo will stop using the IBM name as it tries to establish itself as a global brand, Amelio said. Lenovo has had rights to the name since acquiring IBM Corp.’s PC unit in 2006 but has been selling a growing number of products under its own brand.
Beijing-based Lenovo’s home China market was its biggest revenue source for the quarter but the sales in the United States, Europe and elsewhere in Asia also grew.
Sales in China rose 16% to $1.8 billion or 40% of the total, the company said. Lenovo is facing growing competition in its home market from industry leader Dell Inc., which is marketing a low-cost PC designed specifically for China’s huge but poor rural market.
Revenues in the United States and the rest of the Americas rose 15% to S$1.2 billion the company said. Sales to Europe, Africa and the Middle East rose 24% to $1.1 billion.
Notebooks were the strongest part of Lenovo’s portfolio, with quarterly sales up 38% to $2.6 billion, or 56% of total sales, the company said.
Lenovo achieved “aggressive cost savings,” slashing production expenses per unit by 13% in the third quarter as part of a long-term effort to streamline production, Amelio said.
The IBM PC unit was a premium, high-cost manufacturer, but Lenovo has been pushing to bring expenses in line with more efficient rivals such as Dell. Lenovo has moved US-based engineering jobs to China and made other cuts.