Thu, May 29, 2003 - Page 11 News List

Legend's Q4 net falls as rivals erode market share

CHINA MARKET Price-cutting by competitors helped slow the growth of the largest Chinese computer-maker

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Legend Group Ltd (聯想), China's biggest computer maker, had a 36 percent decline in fourth-quarter profit as price-cutting by rivals such as Dell Computer Corp eroded its share of the world's fastest-growing computer market. The company's stock had its biggest fall in more than a month.

Net income in the three months ended March 31 fell to HK$177.9 million (US$22.8 million) from HK$279.5 million in the year-earlier period.

Sales rose about 2 percent to HK$4.2 billion from HK$4.1 billion.

Legend's sales growth has slowed from an annual average of 67 percent in the three years to 2001 because many residents in China's big cities such as Shanghai already own a computer.

Dell, Toshiba Corp and local rivals such as Founder Holdings Ltd have taken market share from Legend by reducing prices.

Legend "used to be a growth company and it's not any more," said Michiya Tomita, who manages the US$60 million Partners China Fund at UFJ Partners Asset Management Co in Tokyo, before the earnings release.

"Its market share is decreasing," he said.

Tomita trimmed his holdings this year of Legend shares, which have fallen 84 percent from their peak in March 2000.

Legend shares fell HK$0.15, or 6 percent, to HK$2.30 at the close of the Hong Kong stock exchange, the biggest decliner on the 33-member benchmark Hang Seng Index and the stock's largest one-day fall since April 24.

The Beijing-based company booked a one-time gain of HK$164.2 million in the fourth quarter of the previous financial year, mainly from the sale of its 55 percent stake in Legend Techwise, a maker of printed circuit boards.

Excluding that gain from the year-earlier figure, fourth-quarter profit increased 54 percent.

Legend's sales may be hurt in the April-June quarter because SARS depressed spending.

Industry sales to corporate clients fell as much as 30 percent after the outbreak, chief executive Yang Yuanqing (楊元慶) said.

The company, which also sells cellphones, personal digital assistants and other handheld devices, slowed promotions in bigger cities as shoppers stayed home after the virus spread in the middle of last month.

Research company International Data Corp last week scrapped its forecast of 11 percent growth in China's personal-computer sales this year because of SARS.

Second-quarter sales may drop by 6 percent, International Data analyst Kitty Fok said in a preliminary estimate.

Legend, which has a 28 percent share of China's computer market, said it expects the nation's PC sales to rise as much as 17 percent by volume and 12 percent by value this year.

The company said average PC selling prices fell 17 percent in China last year.

The company, which depends on the domestic market for 95 percent of sales, also plans to expand overseas.

Legend, which last month created the Lenovo brand for the offshore market, said it is targeting sales of US$10 billion by 2010.

It previously said it wants to increase sales abroad to a fifth of its total by 2007.

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