Lenovo undershoots Wall St as US disappoints

PC maker cracks a tooth on credit crunch

Lenovo today posted fourth quarter results that fell short of analyst forecasts, despite doubling its earnings and seeing strong sales in China and Europe.

The Beijing-based firm, which is the world’s fourth biggest PC maker, was hampered by disappointing notebook sales in the economically gloomy US.

Total revenues at the firm, which bought IBM’s PC unit in 2006, rose 13.5 per cent to $3.7bn in Q4.

Lenovo racked up net profit of $120.5m for the three months ended 31 March 2007 – excluding the sale of its loss-making mobile biz, which brought in a $65m pre-tax gain – against $60m for the same period a year ago. According to Reuters, analysts had predicted the PC vendor would pull in $129.2m for the quarter.

Sales in China, where Lenovo derives one-third of its revs, were up 18 per cent to $1.29bn in the quarter. Europe, Africa and the Middle East reeled in a healthy $879m, an increase of 30 per cent on the same period in 2007.

But in the Americas in general, and the US in particular, where the global economic downturn has perhaps been most keenly felt, Lenovo jacked up revenue by just nine per cent to $1bn for the quarter.

The company blamed sluggish sales of notebooks in the US, however it was also keen to stress that it had maintained its market share in that region.

Perhaps unsurprisingly, given the less-than-pretty situation in the current US market, Lenovo’s chairman Yang Yuanqing said in a statement that the firm was eyeing up developing countries where it will be gunning for more sales.

"We have successfully assumed responsibility for our sales and customers, completed our brand transition, rolled out the transaction business outside of China, launched our consumer business, and released highly innovative products.

"Lenovo’s global competitiveness substantially increases with each of these solid steps and provides greater momentum for sustainable growth," Yuanqing optimistically chimed.

He added that plans were afoot to expand the company’s retail business, a move that follows Dell’s recent decision to punt its boxes in superstores around the globe.

Despite such a robust expansion plan, Dell has failed to make enough of an impact in an increasingly squeezed market hamstrung by a slowdown in consumer spending. It's a fact that has forced Dell to axe jobs and shake up its biz strategy.

For the full fiscal year Lenovo’s earnings were up 201 per cent to $484m, while sales rose 17 per cent year-on-year to $16.4bn. ®

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