Lenovo Q2 profit up 88 percent, beats forecast

HONG KONG Wed Nov 2, 2011 6:00am EDT

A salesperson waits for customers at a Lenovo shop in Shanghai February 17, 2011. REUTERS/Aly Song

A salesperson waits for customers at a Lenovo shop in Shanghai February 17, 2011.

Credit: Reuters/Aly Song

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HONG KONG (Reuters) - Lenovo Group Ltd, the world's No.2 PC brand, posted a better-than-expected 88 percent rise in second-quarter profit, helped by acquisitions and an increase in sales in emerging markets such as China.

In a separate statement, the computer maker said its chairman, Liu Chuanzi, had tendered his resignation, with Chief Executive Yang Yuanqing taking over the position, although analysts said there would not be any major changes in overall company strategy.

"Uncertainties over global economic recovery, the renewed debt crisis in Europe, and tablet PC cannibalization of entry-level consumer PCs remain," Lenovo said in its earnings statement.

Worries over a shortage of hard disk drives due to severe floods in Thailand and weak demand in developed markets such as the United States and Europe were likely to dim the outlook for Lenovo and its PC peers, analysts said.

Floods in Thailand, the world's No.2 hard disk drive supplier, has hurt computer makers, with Taiwan's Acer Inc saying it will raise disk drive prices and Asustek Computer Inc holding a conservative outlook on the fourth quarter.

Last week, Lenovo said it expected some constraints on hard disk drive supplies through the first quarter of next year, roughly in line with analysts forecasts.

On Wednesday, Lenovo reported a profit of $143.92 million for the second quarter ended September, up from $76.59 million a year earlier. The result beat an average profit forecast of $118.3 million from eight analysts polled by Thomson Reuters I/B/E/S.

The company, which overtook Dell Inc this year to claim the No.2 spot in the third quarter, trails leader Hewlett-Packard Co after a series of acquisitions in Japan and Germany.

In June, Lenovo agreed to buy Germany's Medion AG in a deal valuing the German company at up to $900 million, its biggest acquisition since its purchase of International Business Machines Corp PC business six years ago.

The Medion deal also came months after it signed a joint venture agreement with NEC Corp to sell laptops in Japan.

Lenovo, one of China's best-known consumer brands, had a 13.7 percent share of the global PC market in the third quarter, according to research firm IDC.

It is making inroads into the booming smartphone and tablet markets, although it has little traction yet.

Lenovo's Hong Kong-listed shares, which have risen 12.45 percent so far this year, gained 4.87 percent on Wednesday, versus the Hang Seng Index's 1.88 percent rise.

(Editing by Miyoung Kim and Chris Lewis)

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