Lenovo Reports 29 Percent Profit Rise

China’s Lenovo reported a nearly 29 percent rise in full-year earnings, driven by growth outside of its domestic market and by rising smartphone sales, which helped to offset slow growth in China and in PCs.

Lenovo is the wrold’s top-selling PC maker, and the fourth-largest maker of smartphones, a market in which it is investing heavily with purchases including the January acquisition of Motorola Mobility from Google for $2.9 billion (£1.8bn). Lenovo is also buying IBM’s x86 server unit for $2.3bn as it seeks to diversify away from PCs. The company rose to international prominence in 2005 with the acquisition of IBM’s PC business.

Growth in Europe, Americas

Full-year net profits rose 28.7 percent to $817.2m, in line with analysts’ estimates, while revenues rose 14.3 percent to $38.7bn.

Sales in China, still Lenovo’s largest market, with nearly two-fifths of its revenues, rose only 1.3 percent to $14.7bn year-on-year. However, the company saw sharp growth in Europe, the Middle East and Africa (EMEA), with a 27.1 percent rise in sales, and a 31.1 percent rise in the Americas. During the three months leading up to December, usually strong in Occidental countries due to the Christmas shopping season, EMEA sales surpassed those in China.

The mobile Internet and digital home business unit saw sales grow by 86.1 percent to $5.7bn, driven by smartphone sales growth.

“Lenovo’s smartphone unit shipments achieved a record-high level of over 50 million for the fiscal year, growing by 72 percent year-on-year, driven by the strong growth in China and emerging markets outside of China,” Lenovo said in a statement.

Lenovo extended its lead as the top PC maker, selling 55 million PCs and extending its market share to 17.7 percent, in an overall market that saw an 8 percent decline in sales. In the company’s fourth quarter its PC shipments to the Americas surpassed those of Apple for the first time, giving Lenovo a 10.8 percent market share there.

Mobile strength

The company sold 50 million smartphones and 9.2 million tablets, marking the first time it has sold more mobile devices than PCs. Lenovo’s smartphone shipments, growing by nearly 60 percent in the three months to December, outpaced worldwide market growth of 28 percent.

“The record sales and profits that we delivered last year prove that Lenovo can grow and deliver its commitments, no matter the market conditions,” said chairman and chief executive Yuanqing Yang in a statement.

Industry analysts said Lenovo’s heavy spending in non-PC acquisitions is necessary to adapt to rapidly changing market conditions.

“Motorola… gives Lenovo a much needed go-to-market route for phones into the US and Latin America, all with the protection of Google’s patents,” said Bryan Ma, an analyst with IDC Asia Pacific, in a research note.

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