| HONG KONG
HONG KONG May 23 Lenovo Group Ltd's
bold acquisitions in its flagship PC business, a foray into
mobile gadgets, and a relatively light debt load are setting it
apart from PC rivals as industry shipments take their steepest
fall in decades.
Lenovo, a sliver away from unseating Hewlett-Packard Co
as the world's top PC maker by shipments, is expected on
Thursday to post a two-thirds rise in quarterly profit, its
fastest in 1-1/2 years, according to analysts' estimates.
"They have been aggressive in acquiring several distributors
in different regions such as Brazil, Europe and Japan over the
past few years, so that basically gave them better distribution,
as well as gains in market share," said Warren Lau, an analyst
at Maybank Kim Eng Securities in Hong Kong.
The Chinese PC maker's net profit is expected to hit $110.0
million in the quarter ended March, up from $66.8 million a year
earlier, based on Reuters calculations using unaudited
nine-month financial data.
Lenovo's full-year net profit was estimated at $618.2
million in a poll of 31 analysts by Thomson Reuters I/B/E/S/, up
from $472.99 million a year ago.
Research firm IDC said global PC shipments fell 13.9 percent
year-on-year in the first quarter of 2013, the biggest decline
since it began tracking the market on a quarterly basis in 1994,
as consumers switched to mobile computing and Windows 8 sales
fell short of expectations.
With shipments unchanged in the first quarter, Lenovo is
outstripping other vendors. PC shipments from HP, Dell Inc
, Acer Inc and Asustek Computer Inc
fell by 11-33 percent during the same period, IDC said.
The latest IDC data showed that Lenovo's market share was
15.3 percent, just 0.4 percentage points lower than HP.
Lenovo shares far outperformed those of its rivals last
year. This year Lenovo, up 3 percent, is still beating Acer.
Dell and HP have staged strong recoveries, but Lenovo's
quarterly net profit has risen consistently over the past few
years. By contrast, HP's net profit was down 16 percent and
Dell's was down 79.5 percent year-on-year, according to the
companies' latest quarterly financial results.
Lenovo has spent heavily over the past few years to
strengthen its PC business, with purchases such as Brazilian
electronics maker CCE last year, Germany's Medion in 2011 and
IBM's PC business in 2005.
Its slew of acquisitions has also sparked market talk that
it might be interested in IBM Corp's server business, as
well as handset makers Research In Motion Ltd and Nokia
Lenovo has declined to comment on the rumours.
Lenovo has cash totalling $4.5 billion, vastly outweighing
debt of $423 million, and giving it the muscle for more buyouts.
HP and Dell have total debt of $28.2 billion and $7.2
billion respectively, compared with their cash balances of $12.6
billion and $10.9 billion.
"We expect Lenovo to remain acquisitive as it is hungry for
growth and so despite high cash balances they will not hike the
dividend," said Jefferies technology analyst Ken Hui.
The Beijing-based company has shed its staid image as the
maker of all-business ThinkPads, and now churns out
multi-coloured IdeaPad Yoga convertible ultrabooks which have
helped build its brand in China and beyond.
Though newer to smartphones than to its core PC business,
Lenovo is the No.2 smartphone vendor in China, a success it
hopes to duplicate in other emerging markets including Russia
and India, where competition from Samsung Electronics Co Ltd
, Apple Inc and others is fierce.
"They are in the right niche markets and hitting the right
segments at the right price points. But this is not sustainable
in the long run unless the mobility business steps up," said a
Hong Kong-based technology banker.