Lenovo Q1 profit almost doubles

Lenovo Q1 profit almost doubles

Hong Kong: Lenovo Group Ltd, the world’s number three Personal Computer (PC) brand, on Thursday reported a near doubling of its first-quarter net profit as it captured more market share in key markets, but global uncertainties are weighing on its outlook.

Lenovo faces the risk of slowing US and European economies as it pushes into mobile devices with its Lepad tablet PC and Lephone smartphones to take on competitors such as Apple and Samsung Electronics.

Its Hong Kong-listed shares, which have fallen about 1% so far this year, rose by as much as 3% on Thursday after it announced its results, outperforming the Hang Seng Index’s 0.2% rise.

“At this point, enterprise spending in response to Gross Domestic Product (GDP) cuts, that’s obviously one to look out for. Other than that, they are executing quite well and taking on more market share," said Gokul Hariharan, an analyst at JPMorgan.

On Tuesday, Dell, the world’s number two PC maker, slashed its 2012 revenue forecast as an already weak outlook for technology spending this year worsened.

Analysts said Lenovo might be little hit by weaker public spending, though a weaker global economy could be a risk factor for some of its markets. “I don’t think Lenovo’s exposure to the public sector is that big. Because of that, they are likely to be much better off in terms of growth," Hariharan said.

Lenovo, the most well-known Chinese PC brand, is trying to grab market share in its mainstay PC business, a sector whose growth has been stunted by handheld gadgets that allow users to make calls, surf the Internet and check emails.

“Although the worldwide PC market has shown marginal improvement and returned to growth during the first fiscal quarter, challenges to worldwide PC demand remain such as the pace of global economic recovery and the ongoing debt crisis in western Europe," Lenovo said in a statement. “Nevertheless, Lenovo remains optimistic that it has the right strategy to continue to outperform the worldwide PC market."

Net profit was $108.8 million for the quarter ended June, up from a revised $54.9 million a year earlier.

The market had expected net profit of $78.6 million, according to the average forecast of seven analysts polled by Thomson Reuters. In the previous quarter ended March, Lenovo’s net profit more than tripled to $42.1 million.

During the quarter, China made up 48% of total sales, while other emerging markets contributed about 18% with the rest coming from mature markets, according to its financial statement.

Globally, Lenovo’s market share rose to 12.2% in April-June from 9.9% in the first three months of 2011.

In June, Lenovo acquired Germany’s Medion AG, just months after it signed a joint venture deal with NEC Corp to sell laptops in Japan. The Medion deal is the biggest for the company since it bought IBM’s PC unit six years ago.