Thursday, 7 November 2013

Lenovo profit leaps as it extends shift to smartphones, servers [ TechSc1ence ]

By Paul Carsten

BEIJING (Reuters) – China’s Lenovo Group Ltd, the world’s biggest personal computer maker, said net profit jumped over a third to a quarterly record as it extended its cruise into smartphones and data servers to offset a global decline in PC sales.

Reporting net profit rose a better-than-expected 36 percent in July-September, Lenovo said on Thursday it will continue to chase acquisitions while mining growth in the market for cloud computing and back-end information storage that’s lured companies from rival IBM to Internet retailer Inc.

The ambitious company was among a range of suitors to approach BlackBerry Ltd before the troubled device maker took itself off the market, according to sources familiar with the matter.

Lenovo, with a 17.3 percent share of worldwide PC shipments according to research firm IDC, reported net profit of $ 219.7 million for its fiscal second quarter, its highest for any quarter, extending its streak of more than three years of double-digit quarterly profit growth.

The profit compared with $ 162 million a year earlier, and with a $ 199.12 million consensus forecast on Thomson Reuters Starmine SmartEstimate.

Lenovo has been aggressively pushing into smartphones and servers as it seeks alternative channels of income to the shrinking PC market, which contracted 7.6 percent in the quarter ended September, according to data from research firm IDC.

“Given its strong financial position, will continue to actively look for inorganic growth opportunities that would supplement its organic growth strategy and accelerate future expansion,” Lenovo said in its earnings statement.

The company also said it remains confident the Chinese economy is recovering.

Yang Yuanqing, Lenovo’s chief executive, hasn’t shied away from expressing his eagerness to use a corporate server business as a way to bundle more PCs into packages it sells to customers.

That would make low profit margin business like selling computers more lucrative, while competitors like Acer Incorporated and Asustek Computer Inc bear the brunt of blows from the downturn in the PC market.

The company has been successfully navigating a course away from PC manufacturing for years. Revenue from mobile phone sales more than doubled in the first half of the fiscal year ending March 2014 compared with the same period in the previous year.

Mobile phone sales accounted for 14 percent of total revenue of $ 18.6 billion in the first half of the fiscal year ended September. For the year ending March 2010, that share of revenue was just 0.5 percent.

Lenovo was the fourth-largest smartphone vendor worldwide with a 4.7 percent share of a market that shipped over a quarter of a billion smartphones in the quarter ended September, according to IDC data.

(Reporting by Paul Carsten; Editing by Kenneth Maxwell)