Lenovo completed its acquisition of IBM’s PC business in 2005, boosting pre-acquisition annual revenues of $3 billion to $13 billion on completion of the deal, and today the company reported quarterly sales to the end of June of $8 billion, a 35 percent increase year-over-year.
At the same time, Lenovo’s first quarter net-income increased by 30 percent year-over-year, to $141 million, which Lenovo Chairman and CEO, Yang Yuanqing, said demonstrated the company’s ability to “maintain profitable growth in a challenging market.”
The third largest PC vendor behind Dell and Hewlett-Packard with its IBM acquisition in 2005, Lenovo is now the world’s second-largest PC vendor, with today’s results showing it has achieving its highest-ever quarterly market share of 15 percent to make significant gains against its competitors.
CEO Yang Yuanqing said Lenovo’s growth was balanced across all geographies, customers segments and products lines, as a result of the company’s continued focus on executing its “protect and attack” strategy of reinforcing its business in established markets while going after potential new markets.
Market commentators observed that, as the industry evolves to the PC Plus era, Lenovo has moved aggressively to ensure that the company is well-positioned as the industry shifts to include more tablets, Smart TVs and smartphones in the product mix.
The results released today show that Lenovo’s gross profit for the first fiscal quarter increased 30 percent year-over-year, with gross margin at 12 percent, while operating profit for the quarter grew 48 percent year-over year to $182 million. Basic earnings per share for the first fiscal quarter were1.37 US cents, or 10.63 HK cents and net cash reserves as of June 30, 2012, totalled $3.7 billion.
"Although the economic environment is somewhat similar to the 2008-2009 downturn, Lenovo’s results are much stronger because we have the right strategy and great execution,” said Yang Yuanqing.
“Our businesses in emerging markets outside of China, our consumer business and MIDH business all achieved rapid expansion, providing the balanced pillars to support our overall performance. Our business in China and our global commercial business maintained strong profitability, which allows us to secure plenty of resources to invest in growth areas and ensure the company’s overall healthy performance.
“Although we're in a challenging environment, we are confident that by continuing to execute our Protect and Attack strategy, Lenovo can achieve sustainable growth and healthy returns in the PC+ era," Yuanqing predicted.
A breakdown of the global regional performance of Lenovo in its first fiscal quarter shows that in its home market of China, the company recorded $3.5 billion in consolidated sales, an increase of 24 percent year-over-year, and accounting for 44 percent of its worldwide sales.
The sales growth in China during the first quarter, further strengthened Lenovo’s number-one position in that market by 3.9 points, resulting in an industry-leading market share in the country of a record 35 percent, further widening the gap between the company and its nearest rivals.
In the Asia Pacific/Latin America region, Lenovo’s PC shipments for the first fiscal quarter increased 59.2 percent, significantly outperforming the overall industry, which saw a decrease of 3.9 percent year-over-year. Consolidated sales totalled $1.7 billion for the first quarter, or 21 percent of the company’s worldwide sales, delivering record double-digit market share in the region with 11 percent, gaining 4.4 share points year-over-year.
And, in the North American market, Lenovo’s consolidated sales totalled $1.2 billion year over-year for the first fiscal quarter, an increase of seven percent year-over-year, representing 15 percent of the company’s worldwide sales.
Lenovo also recorded impressive results in the European, Middle East and African markets, increasing PC shipments by 62.3 percent in the first fiscal quarter year-over-year, which was more than six times the overall industry growth rate in the region of 9.1 percent. Consolidated sales in the region increased 62 percent year-over-year during the quarter, to $1.6 billion in consolidated sales, or 20 percent of Lenovo’s worldwide sales.
According to Yuanqing, Lenovo’s laptop computers continued to be the largest contributor to the company’s sales worldwide, generating 54 percent of its total sales revenue, with consolidated sales worldwide in the first fiscal quarter totalling $4.3 billion, an increase of 23 percent year-over-year.
Laptop shipments worldwide in the quarter were up 27 percent year-over-year, giving Lenovo a gainof 3.2 share points and a company record-high laptop market share of 15.4 percent.