Lenovo profit surges on smartphone, tablet sales

Updated: 2013-11-08 12:58

By Gao Guan in Beijing and Amy He in New York (China Daily USA)

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Lenovo profit surges on smartphone, tablet sales

Ashley Rodrigue, a Lenovo Ambassador, introduces Lenovo's new Yoga tablet at a New York preview event on Oct 29. Amy He / China Daily

Lenovo Group Ltd, the world's largest personal computer maker, reported a higher-than-expected second-quarter profit on Thursday, boosted by growing sales of smartphones and tablets.

Net profit was $220 million in the quarter ended in September, a jump of 36 percent year-on-year, the company said. Revenue was $9.8 billion, a 13 percent increase compared with the same period last year.

A sales increase in emerging mobile devices was one of the major contributors for the growth. Yang Yuanqing, chairman and CEO of Lenovo, said the company has sold more mobile devices than personal computers over the past months. Lenovo's consumer electronics unit, which includes smartphones and tablets, contributed $1.5 billion in revenue.

The Beijing-based company said it sold 29 million devices in the past quarter, the most in the company's history.

"Overseas mergers and acquisitions provided a major driver for Lenovo's business growth in previous quarters. This quarter's growth was because of Lenovo's own innovation and successful marketing strategy in the mobile devices sector," said Antonio Wang, associate director at industry consultancy IDC China.

Data from IDC showed Lenovo shipped 12.3 million smartphones from July to September.

However, its smartphone shipments still lagged behind Apple Inc, Samsung Electronics Co Ltd and Huawei Technologies Co Ltd.

Total shipments of the top three exceeded 127 million, according to IDC

"Competitors such as Samsung entered the China market a long time ago, but because Lenovo is focusing on growth in the mid- and low-end markets, the distance among other brands is set to narrow," said Liu Jun, head of Lenovo's consumer electronics business.

Lenovo sold more smartphones priced under 2,000 yuan ($320) than Samsung in the Chinese market, said Liu.

China is the world's biggest smartphone market. It accounted for 39 percent of the global smartphones as of September, data from Canalys showed on Wednesday. Lenovo posted the largest annual increase among the leading smartphone vendors, according to an IDC report. "The company relied on its stronghold in the Asia-Pacific region and particularly in China, where the overwhelming majority of its smartphones went," the report added.

"The future of Lenovo would be more on [smartphones] and tablets," said Zhang Jun, analyst at technology analysis firm Wedge Partners. The current smartphone and tablet businesses are very focused on China, he said, and Lenovo is growing its smartphone business fast.

"We are still positive on Lenovo," Zhang said, and Lenovo's global expansion into the smartphone business "might potentially hurt [Samsung's lower-middle] end smartphone business. Zhang also said that Lenovo has been "cautious" to expand into the global market in the past because they wanted to create better products in order to "compete with tier-1 players like Samsung and Apple".

Lenovo has also made progress in other markets, pushing into Latin America and emerging markets in Southeast Asia. "We will speed expansion in more emerging markets in the Middle East and Latin America through innovation," said Yang.

"Hardware making is a prominent advantage for Lenovo, but we are still looking to integrate hardware with software and applications in order to make the next-generation devices," he added.

Yang estimated that global demand for PCs will rebound by the end of 2014, boosted by the global enterprise-level market and growing orders from China.

The company said it is looking for acquisition targets for all its product lines and M&As in the smartphone sector will be the company's top task, said Wong Wai Ming, chief financial officer of Lenovo.

Earlier media reports indicated Lenovo was actively courting the drowning Canadian cell phone maker BlackBerry Ltd. BlackBerry said on Wednesday it is no longer for sale.

Contact the writer at gaoyuan@chinadaily.com.cn and amyhe@chinadailyusa.com

(China Daily USA 11/08/2013 page10)