April 11 (The following statement was released by the rating agency)
Fitch Ratings expects China's Lenovo Group Limited (Lenovo) to continue to perform well in what is likely to remain tough times for most PC makers. Lenovo was the only top-five PC manufacturer to achieve growth in both worldwide and US PC shipments during the January-March 2013 quarter (Q113).
Lenovo's strong brand power in China, improving position in overseas PC markets and rising smartphone market share are key differentiating factors in an industry that continues to face a number of headwinds including anaemic economic growth in developed markets and ongoing substitution by tablets and smartphones. According to IDC data, Lenovo's level of shipments held steady year-on-year (yoy), cementing its number two position with a 15% global market share. In contrast, market leader Hewlett-Packard Company's (A-/Stable, 16% share) unit shipments declined 24% yoy. Global PC unit shipments fell 14% yoy to 76.3 million during Q113, marking the fourth consecutive quarter of decline and the steepest since IDC began publishing PC shipment data in 1994.
Lenovo's revenue grew robustly (18% yoy) for the nine months to December 2012 period with the company gaining market share in every geography. During this period profits and profit margins increased, contrasting with declines reported by competitors. Notably Lenovo's share of the Chinese smartphone market increased to 12.3% in Q412 from 7.6% in Q411, ranking second behind Samsung Electronics Co., Ltd. (A+/Stable).
Asian PC makers continue to confront a number of headwinds: weak economic growth in developed countries has extended the replacement cycle; substitution by smartphone and tablets has affected demand; newer products such as "ultrabooks" and Windows 8-based products have yet to make a significant impact; and high levels of competition are driving down margins.
IDC's preliminary data showed that Acer Inc's (BB+/Negative) worldwide PC shipments declined a steep 31% yoy in Q113, and its market share fell to 8% in Q113 from 10% in Q112. Acer is relying on its mid- to low-end tablets to revitalise its profitability. The company expects sales of its tablet units to hit five to 10 million units in 2013, from two million units in 2012. However, competition is rising in the lower-end tablet market, which Fitch believes will pressure margins, even if the company is able to meet its shipment targets.