* FY net profit $817.2 mln vs $819.7 mln analyst view
* Revenue rises 14.3 pct to $38.7 bln
* Smartphone shipments reach record of more than 50 mln
(Recasts, adds CEO comments, trader, analyst comment)
By Paul Carsten
BEIJING, May 21 China's Lenovo Group Ltd
, the world's biggest personal computer maker, showed
why it is expanding overseas and into smartphones as it reported
its slowest annual profit growth in five years.
Lenovo is especially pushing smartphones, to offset a
decline in its once-mainstay personal computers (PC) as
consumers switch to mobile devices.
Lenovo, which competes with Apple in the U.S.,
agreed to acquire IBM Corp's low-end server business and
Google Inc's Motorola Mobility smartphone unit in two
separate deals worth a total of $5.2 billion in January.
Chief Executive Yang Yuanqing said he hoped those deals,
which require U.S. approval, would not be impacted by tensions
between Beijing and Washington over the U.S. indictment of five
Chinese military officers for cyber-theft against American
"I don't think (the cyber-theft case) will impact Lenovo's
business," said Yang. "For a long time we've operated not just
in China but also in the U.S. and other global markets. We have
always been a transparent company, a trusted company, we've
never had any issue with the government."
"Regarding the approval of the (IBM and Motorola Mobility)
deals, we definitely hope it will not have an impact," Yang said
in a telephone interview.
The company, which became a global brand in 2005 after
buying the PC unit of IBM, wants to buy the low-end server unit
to combat slow PC sales.
The majority of Lenovo's revenue growth in the twelve months
to end March, came from overseas markets: revenues in Europe,
the Middle East and Africa (EMEA) and the Americas each climbed
roughly 30 percent, to account for 83 percent of total revenue
Net income for the year ending March rose 28.7 percent to
$817.2 million, a record high and in line with analyst estimates
of $819.7 million. Growth in China, which accounts for almost
two-fifths of its $38.7 billion total revenues, was 1.3 percent.
Lenovo's success in emerging markets spurred confidence in
the company's shares, which were up 3.4 percent by close of
trading on Wednesday versus a 0.01 percent rise in the Hang Seng
The company said PC profit margins had improved in China
even as the market slowed. In the EMEA region it reported 24
percent growth in PC shipments and the Americas saw 27 percent
Lenovo still faces challenges with smartphones, despite
shipments growing 72 percent year-on-year to more than 50
million units globally. Margins are very low, and China, where
the company shipped 89 percent of its handsets in the fiscal
year, is one of the world's most competitive markets.
"The China smartphone industry is very difficult to make
money from, if you look at most Chinese players they're not
making money at the moment," said Jean-Louis Lafayeedney, a Hong
Kong-based technology analyst at JI Asia, an affiliate of
"The fact that Lenovo is going overseas with Motorola is
probably not a bad thing and may come at a good time actually,"
Lenovo aims to sell 100 million smartphones and tablets in
the coming year, Chief Executive Yang Yuanqing said, with
smartphones accounting for 80 million units should the Motorola
deal be finalised.
"Overseas there are not as many competitors, that's why we
want to do the Motorola deal," said Chief Executive Yang
Yuanqing. "In mature markets there's not as much competition."
The company has stressed the Motorola and IBM acquisitions
will weigh on finances in the near term, and the loss-making
businesses could take three to five quarters to make them
Yang said Lenovo would focus for the time being on the U.S.
acquisitions and would not be looking for other sizeable
"I don't think we have the energy to buy big companies or
big businesses, but small business acquisitions are still
possible," Yang said.
(Additional reporting by Donny Kwok in HONG KONG; Editing by
Christopher Cushing and Elaine Hardcastle)