Lenovo Profits Rise on Higher PC Shipments

Lenovo Group Ltd.'s fiscal first-quarter profit jumped more than tenfold on higher PC shipments as the company's ongoing efforts to cut costs and operate more efficiently yielded results.

Lenovo's fiscal first-quarter revenue rose 13 percent to US$3.9 billion, as every geographical region reported double-digit shipment growth for the first time since its 2005 acquisition of IBM Corp.'s PC Division. The company's net profit rose even faster, hitting $67.8 million, an increase of 1,184 percent over the same period last year. The profit came despite a $45 million restructuring charge recorded during the period.

"Our board and management team are very encouraged by Lenovo's performance over the last couple of quarters," William Amelio, the company's CEO, told analysts during a conference call. But he cautioned that Lenovo must continue to improve its operational efficiency and control expenses to sustain this growth in the coming quarters.

Yang Yuanqing, Lenovo's chairman, was upbeat about the results, saying they proved the acquisition and integration of IBM's PC Division was a success.

Lenovo's PC shipments during the quarter rose 22.3 percent to nearly 4.9 million units, up from 4 million during the same period last year, according to IDC. Lenovo did not reveal the total number of units shipped during the period.

Lenovo's biggest gains came in Europe and the Americas, where the company had lost money after its acquisition of IBM's PC Division. Both regions are now profitable. Shipments in Europe rose 22 percent, while shipments in the Americas were up 15 percent. Rising demand from India and Southeast Asia led Lenovo's shipments in Asia, excluding China, to rise 12 percent.

But Lenovo's biggest gains came from China, where PC shipments rose 30 percent.

Notebook PCs accounted for 53 percent of Lenovo's revenue during its fiscal first quarter, with worldwide shipments up 26 percent over last year. Desktop demand also showed healthy growth, with shipments up 20 percent, representing 43 percent of revenue. Lenovo's handset business, which is confined to China, was relatively flat, with shipments rising just 2 percent and accounting for 3 percent of revenue.

Lenovo remains the world's third-largest PC maker, according to IDC, but faces pressure from Taiwanese rival Acer Inc., which has been growing quickly and aims to overtake Lenovo as number three by the end of this year.

Lenovo and Acer were evenly matched during the first quarter of the year, with both companies holding 6.7 percent of the market. Lenovo managed to reclaim the number three spot during the second quarter, but Acer is gaining ground, increasing its shipments during the period by 55.4 percent, IDC said.

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