Sat, Nov 03, 2007 - Page 11 News List

Lenovo shares hit seven-year high

BEATING THE ANALYSTS Lower memory prices and job cuts at the PC unit increased the operating margin to 2.7 percent, while profit nearly tripled last quarter


Lenovo Group Ltd (聯想), the world's third-largest maker of personal computers, climbed to a seven-year high in Hong Kong trading as Thinkpad laptop sales helped profit rise more than analysts estimated.

Lenovo advanced 2.2 percent to HK$8.74 at the close of trading on the Hong Kong stock exchange, the highest close since August 2000.

The Hang Seng Index fell 3.3 percent. The stock has more than doubled this year.

Bear Stearns Cos, Citigroup Inc and Credit Suisse Group analysts raised their price targets on Lenovo's stock after the company said yesterday profit almost tripled last quarter.

Revenue climbed 20 percent to a record, helping the Raleigh, North Carolina-based company take market share from Dell Inc.

There are "more improvements possible," Citigroup's Kirk Yang (楊應超) wrote in a report yesterday. Yang, who described the profit increase as "amazing," raised his target price on the stock by 20 percent to HK$12.

Bear Stearns analyst Jack Tse raised his target price by 23 percent, while Credit Suisse's Venugopal Garre increased the target price by 78 percent to HK$9.33.

Wong Chi-man, an analyst at China Everbright Research Ltd, lifted his investment rating on Lenovo to "accumulate" from "hold."

Lenovo posted second-quarter net income of US$105.3 million, beating the US$72 million median estimate of five analysts surveyed by Bloomberg.

Job cuts at the PC unit it acquired from International Business Machines Corp and lower computer memory prices helped lift the operating margin to 2.7 percent, compared with 1.2 percent a year earlier.

"If we continue with the performance we have now, we don't need to worry about any restructuring," CEO William Amelio said in an interview on Thursday.

Lenovo said in April it plans to cut 1,400 jobs as part of the Chinese company's efforts to integrate the former IBM unit. The move followed the reduction of 1,000 workers last year.

Lenovo derived most of its growth from China, Taiwan and Hong Kong, the company said on Thursday.

Sales in the so-called greater China region expanded 27 percent in the quarter, compared with 23 percent growth for the rest of Asia, 18 percent in Europe, the Middle East and Africa and 11 percent in the Americas.

The company plans to step up growth outside China, its biggest market, by offering laptops to consumers in the US, France, Russia and South Africa starting in January, chairman Yang Yuanqing (楊元慶) said in September.

"We believe consumer PCs present tremendous opportunities for Lenovo," Bear Stearns' Tse wrote in a report yesterday.

Lenovo had 8.2 percent share of global PC shipments in the quarter ended in September, IDC said, compared with 7.7 percent a year earlier.

The Chinese company's market share ranks behind only Hewlett-Packard Co's 19.6 percent and Dell's 15.2 percent, according to IDC.

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