Fri, May 23, 2008 - Page 11 News List

Lenovo’s profits beat the expectations of analysts

GROSS PROFITChief executive officer William Amelio raised profits for the sixth consecutive quarter through lifting PC sales via dealers and the Internet in Europe

BLOOMBERG

Lenovo Group Ltd (聯想), China’s biggest personal-computer maker, reported fourth-quarter profit that beat analysts’ estimates on increased sales in Europe.

Net income more than doubled to US$140 million in the three months ended March 31, from US$60 million a year earlier, the Raleigh, North Carolina-based company said in a statement yesterday. The median of seven analyst estimates compiled by Bloomberg was for profit of US$133 million.

Chief executive officer William Amelio increased profit for the sixth successive quarter by increasing PC sales through dealers and the Internet in Europe.

In January, the company introduced its line of IdeaPad notebooks to lure individual consumers, a market that will outgrow Lenovo’s main business of serving corporate customers, according to researcher IDC.

Sales from continuing operations rose to US$3.74 billion from US$3.29 billion, the statement said. Lenovo’s profit was boosted by a pretax gain of US$65 million from the sale of its mobile phone unit, which was completed in March, the company said.

Lenovo raised PC shipments in central and eastern Europe by 56 percent in the quarter, the company said.

The Chinese computer maker, which moved its headquarters to the US after acquiring International Business Machines Corp’s PC unit in 2005, failed to match the gain in shipments at larger rivals Dell Inc and Acer Inc in the quarter.

Lenovo raised PC shipments 21 percent in the three months ended March, compared with 66 percent for Taiwan’s Acer, and 22 percent for Dell, according to IDC.

The company’s full-year profit tripled to US$484.3 million. Net income beat the US$477 million median estimate of seven analysts surveyed by Bloomberg.

Sales from continuing operations rose to US$16.35 billion from US$13.98 billion, it said.

The Chinese company will “participate” in the market for low-cost laptops, Amelio said at a briefing in Hong Kong yesterday, without giving a timeframe.

Acer, based in Taipei, said last month it will offer several notebooks for less than US$500 from June, joining Dell and Hewlett Packard Co in tapping the market for lower-specification computers.

Gross profit margin, or the percentage of sales left after deducting production costs, narrowed to 15 percent in the three months to March, matching the median estimate of three analysts surveyed by Bloomberg.

That compares with 15.2 percent in the previous quarter.

PC makers’ profitability may be threatened as they face higher prices from their suppliers. Compal Electronics Inc (仁寶電腦) and Quanta Computer Inc (廣達電腦), the world’s two largest contract manufacturers of laptops, said this month they plan to raise prices because of higher labor and material costs.

“Increase in labor costs will affect our operations,” chairman Yang Yuanqing (楊元慶) said at yesterday’s briefing.

Lenovo’s sales growth in the Americas region slowed to 2.9 percent in the fiscal fourth quarter, after expanding 10.4 percent in the previous three months. The slowdown in the US economy affected demand for notebooks, the company said.

The US computer market is “challenging,” chief financial officer Wong Wai-ming (黃偉明) said yesterday.

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