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Cost-cutting, strong sales lift Lenovo's quarterly income

AP , BEIJING

Lenovo Group (聯想), the world's No. 4 personal computer maker, yesterday reported that quarterly profit rose 198 percent and forecast strong sales this year despite a possible US economic slowdown.

Driven by strong sales and aggressive cost-cutting, profit for the three months ending on Dec. 31 were US$172 million on revenues of US$4.6 billion, Beijing-based Lenovo said.

That was below the average US$253.5 million in third-quarter profit expected by analysts polled by Dow Jones Newswires. Earnings per share were US$1.93.

For this year, Lenovo expects double-digit sales growth despite a possible US slowdown owing to its bigger presence in faster-growing markets such as China and India, chief executive William Amelio said.

"We have such a good base in other geographies, we have a great way to insulate ourselves from some of the downturn that may occur in the United States," Amelio said in a conference call with analysts.

Also this year, Lenovo will stop using the IBM name as it tries to establish itself as a global brand, Amelio said.

Lenovo has had rights to the name since acquiring IBM Corp's PC unit in 2006 but has been selling a growing number of products under its own brand.

Lenovo's home China market was its biggest revenue source for the quarter, with sales rising 16 percent to US$1.8 billion, or 40 percent of the total, the firm said.

Lenovo is facing growing competition in its home market from industry leader Dell Inc, which is marketing a low-cost PC designed specifically for China's huge but poor rural market.

Revenues in the US and the rest of the Americas rose 15 percent to US$1.2 billion, the company said. Sales to Europe, Africa and the Middle East rose 24 percent to US$1.1 billion.

Notebooks were the strongest part of Lenovo's portfolio, with quarterly sales up 38 percent to US$2.6 billion, or 56 percent of total sales, the company said.

Lenovo achieved "aggressive cost savings," slashing production expenses per unit by 13 percent in the third quarter as part of a long-term effort to streamline production, Amelio said.

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