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November 02, 2011

What Slowdown? Lenovo Posts Huge 2Q Backed by Strong PC Sales

By Beecher Tuttle, TMCnet Contributor

Lenovo (News - Alert) on Wednesday reported better-than-expected net profits for its second fiscal quarter, powered mainly by strong PC sales in emerging markets.

Net earnings for the quarter ending September 30 increased an astounding 88 percent to $143.9 million, up from $76.6 million a year earlier. The Chinese electronics giant easily surpassed Wall Street expectations through a 35.8 percent uptick in worldwide PC shipments. The growth is especially eye-opening considering the overall PC industry growth rate was just 5 percent during the last three months.

With its strong 2Q performance – and its recent acquisition of German PC maker Medion – Lenovo quietly moved past Dell (News - Alert) to become the world's second largest PC manufacturer. The Chinese company now trails only Hewlett-Packard, which considered shuttering or spinning off its own hardware division earlier this year before smartly reversing course. Lenovo has seen its PC unit grow faster than the industry average for 10 consecutive quarters.

While competitors have invested nearly all their resources taking on Apple (News - Alert) in the tablet space, Lenovo has concentrated more of its efforts on PC sales in China and other emerging markets, where it continues to grow more than three times faster than the industry.

That said, the company is making some headway in the tablet arena, at least in China, where Western competitors have a severe disadvantage. After just a short time in the tablet game, Lenovo is already ranked number two in the Chinese market. The company is also "encouraged" with it smartphone sales, although it didn't disclose specific figures.

"In just two quarters, Lenovo has gone from the number four to the second largest PC vendor in the world," Yang Yuanqing, Lenovo CEO, noted in a statement. "Our aspiration is not only to be the leader of traditional PCs, but to also accomplish much more in the extended PC categories, such as the smartphone and tablet."

In related news, Lenovo announced on Wednesday that CEO Yang Yuanqing will assume the dual role of chairman, succeeding company founder Liu Chuanzhi who took over the position in 2009 to help Lenovo climb out from the economic recession. Chuanzhi will assume the role of honorary chairman.

Beecher Tuttle is a TMCnet contributor. He has extensive experience writing and editing for print publications and online news websites. He has specialized in a variety of industries, including health care technology, politics and education. To read more of his articles, please visit his columnist page.

Edited by Rich Steeves

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