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Lenovo nearly doubles net profits in Q1 earnings report and not so certain about mainstream Ultrabooks by end of year. Lenovo’s revenues jumped to $5.92 billion during the fiscal quarter, representing a 15 percent increase over last year’s figures, while net profits nearly doubled to $108 million and global PC sales nudged upward 23 percent, even at a time when most other manufacturers are seeing relatively sluggish growth. Chief Operating Officer Rory Read spoke about Lenovo’s Ultrabook strategy in response to a question from an analyst and said that they introduce over the coming quarters the ability to reach mainstream price points with Ultrabook solutions that were only 18 months ago in premium segments…………….

 

Lenovo Group reported results for its first fiscal quarter ended June 30, 2011 and for the seventh consecutive quarter, Lenovo grew faster than any of the top five PC manufacturers, helping the Company to become the world’s third largest PC vendor in total shipments. During the first quarter, Lenovo‘s worldwide PC shipments grew 23.1 percent year-over-year. Comparatively, industry PC shipments increased just 2.7 percent worldwide for the same period, marking the ninth quarter in a row that Lenovo has grown faster than the industry. Consolidated sales for the first fiscal quarter increased 15 percent year-over-year to a record of US$5.9 billion. The Company’s gross profit for the quarter increased 41 percent year- over-year, with gross margin at 12.5 percent. Operating profit for the quarter grew 51 percent year-over year to US$123 million. Operating profit margin continued to expand, even after the Company‘s reinvestment in branding, R&D and mobile internet business to drive future growth. For the fiscal quarter, Lenovo reported a pre-tax income of US$123 million, a 64 percent jump year-over-year. Profit attributable to equity holders for the quarter was US$108 million, increased 98% year-over-year. Basic earnings per share for the first fiscal quarter was 1.11 US cents, or 8.63 HK cents. Net cash reserves as of June 30, 2011, totaled US$3.6 billion. In June 2011, Lenovo announced its acquisition of MEDION AG, a leader in PC, multimedia products, mobile communications service and consumer electronics in Germany. The acquisition will double Lenovo‘s market share in Germany and make it the second-largest PC company in Europe‘s largest PC market. The Medion deal will also help fuel Lenovo‘s expansion in consumer PCs and the high-growth mobile Internet market.

 

Lenovo also completed the formation of the joint venture company with NEC Corporation, forming the largest PC group in Japan. This joint venture makes Lenovo the number one PC vendor in two out-of-the three largest PC markets in the world. “The Board is very satisfied with Lenovo’s first quarter results. Since we adjusted our leadership team in early 2009, our business continues to climb and everything has been executed well according to our original plans,” said Lenovo Chairman Liu Chuanzhi. “Lenovo has an outstanding leadership team, the right approach to developing strategies, and strong execution capabilities, demonstrated by our performance this quarter. Our results show that Lenovo’s acquisition of the IBM PC business has become a success. In future quarters, you will see clearly that we will take what we’ve learned from this acquisition and apply that knowledge towards our joint venture with NEC in Japan and our acquisition of Medion in Germany.” “The solid execution of the successful “Protect and Attack” strategy fueled Lenovo’s strong performance in the past fiscal quarter that we have achieved record high in global shipments, revenue as well as global market share. At the same time, we outperformed the industry in all geographies, customer segments and product segments,” said Yang Yuanqing, Lenovo CEO. “Over the past two years, we have placed emphasis on and invested significantly in our business growth. Our global market share has now reached double-digits and we have attained a double-digit share in a greater number of our strategic markets. Starting this year, we are advancing to a more balanced strategy of continuing to grow, while shifting our focus more on profitability.”

 

Lenovo China recorded US$2.8 billion in consolidated sales in the first fiscal quarter, accounting for 47.9 percent of the Company’s worldwide sales. During the quarter, Lenovo further strengthened its number-one position in China by 2.3 points, which resulted in an industry-leading market share in China of 31.7 percent, widening the gap between Lenovo and its major rivals. Lenovo‘s PC shipments in China increased 23.4 percent year-over-year in the quarter, exceeding the overall industry increase of PC shipments in China of 14.3 percent. In Emerging Markets Lenovo‘s consolidated sales totaled US$1 billion for the first fiscal quarter, or 17.5 percent of the Company’s worldwide sales. Lenovo‘s PC shipments across the region increased dramatically by 46.5 percent in the quarter, more than three-times faster than the industry growth rate in this region of 14.7 percent year-over-year. Lenovo saw market share gains throughout the region for a total market share of 6.9 percent, highlighted by the Company’s record-high double-digit market share in India at 10.8 percent after a 3.6 points gain in that country during the first quarter year-over-year. Mature Markets posted US$2.1 billion in consolidated sales, or 34.6 percent of the Company’s worldwide sales during the first fiscal quarter. Despite a year-over-year 9.4 percent decrease in the industry’s PC shipments across the region, Lenovo grew its PC shipments in the quarter by 8.5 percent. Of particular note, Lenovo’s PC shipments in North America grew 30.8 percent, compared to the market that fell four percent, allowing the Company to pick up 1.9 points of market share there. In Japan, Lenovo increased PC shipments by 14 percent year-over-year, in a market that overall grew at 2.9 percent for the quarter.

 

Lenovo‘s Laptop computers continued to be the largest contributor to the Company’s sales worldwide, generating 59.8 percent of Lenovo‘s total sales revenue. Consolidated sales for Lenovo’s laptop PC business worldwide in the first fiscal quarter totaled US$3.5 billion, an increase of 14 percent year-over-year. The Company’s laptop shipments worldwide in the quarter were up 23 percent year- over-year. During the first quarter, Lenovo introduced its highly-anticipated ThinkPad X1 laptop PC, giving users the thinnest, lightest, and highest performance combination for its class. The ThinkPad X1 was designed for mobile professionals who demand the best in performance, mobility and entertainment, and offers a simple, modern style with backlit keyboard, fast-charging batteries and a host of performance and multimedia capabilities. Consolidated sales of Lenovo Desktop PCs worldwide increased 18 percent year-over-year in the first fiscal quarter to US$2.0 billion, or 34.1 percent of Lenovo’s total sales revenue. Desktop shipments for the same period increased 23 percent across the industry. During the first quarter, Lenovo announced the ThinkCentre 91z all-in-one (AIO) desktop PC, blending a sophisticated image, purposeful function and extreme productivity into a small, compact model. The ThinkCentre 91z is one of the industry’s most powerful AIOs, yet one of the thinnest, measuring just 2.5 inches, ideal for small and medium businesses looking for style and high performance with the convenience of a small footprint. In its first full quarter of operations,Lenovo‘s Mobile Internet Digital Home (MIDH) business group helped the Company achieve a 34 percent increase in total handset shipments of year-over-year,including smartphones and feature phones. New Lenovo smartphone and LePad tablet products are leading the way for Lenovo in China, and a new family of smartphones will launch in the coming months to drive future growth. Just last month, Lenovo introduced three new tablets, the IdeaPad Tablets K1 and P1, and the ThinkPad Tablet, available for sale in international markets.

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