PC maker Lenovo's Q3 profit beats expectations

Hong Kong

LENOVO Group, the world's largest personal computer maker, posted better-than-expected quarterly results and shrugged off the impact of a bruising Sino-US trade war, sending its shares soaring 11 per cent to three-year highs.

The company, dual -headquartered in China and the United States, is optimistic of further growth in China and will focus on the premium market, CEO and chairman Yang Yuanqing told Reuters after December quarter revenue rose to the highest in four years on a strong showing across its major business groups.

"Definitely we don't want to see more trade war, political tension. If that continues, that would affect everyone, not just us, all multinationals," Mr Yang said in an interview on Thursday.

Lenovo shares rose 11.4 per cent on Thursday morning, poised for their best one-day gains in almost 10 years, and adding about US$1 billion to their market value.

Mr Yang said Lenovo is well-prepared for geopolitical and economic volatility as its manufacturing facilities are spread across China, the United States, India, Brazil, Japan and Mexico, ensuring a stable supply.

Lenovo, which bought IBM Corp's personal computer and server businesses, relies on the Americas for 31 per cent of its total revenue, versus 26 per cent from China.

Net profit for the quarter was US$233 million, ahead of the US$207 million average of 10 analyst estimates compiled by Refinitiv and up from a loss of US$289 million in the same period a year earlier when Lenovo took a one-off hit due to US tax reforms.

Lenovo said its share in the global PC market rose to 24.6 per cent and that it expanded in premium markets such as workstations, thin and light PCs and gaming PCs.

Total revenue in the quarter rose 8.5 per cent to US$14.04 billion, while that from its PC and smart devices group rose 12 per cent to a record US$10.7 billion.

Industry tracker Gartner said last month that worldwide PC shipments fell 4.3 per cent in the December quarter and 1.3 per cent in 2018, but that the biggest three vendors - Lenovo, HP Inc and Dell Inc - expanded their market share in the quarter to 63 per cent of total shipments from 59 per cent.

Lenovo's mobile phone business recorded a pre-tax profit of US$3 million, its first pre-tax profit since it bought Motorola's mobile business in 2014 for US$2.9 billion and struggled to integrate the assets.

But revenue declined 20 per cent, with Lenovo attributing the fall to a strategy of focusing on core markets.

Mr Yang said he expects the PC market to consolidate further and that Lenovo would "leverage suitable opportunities".

He also said that the group sees further growth potential in the China PC market, which still lags the US industry in sales volume and revenue.

"This is not consistent with our population," Mr Yang said, drawing reference to China's smartphone and vehicle markets, which are the world's largest.

The loss in Lenovo's data centre business narrowed to US$55 million from US$86 million a year earlier, while revenue grew 31 per cent.

Mr Yang said a new joint venture with US cloud storage company NetApp would give a further boost to this segment, but declined to give a target date for breaking even. REUTERS

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