* Q3 net profit $204.9 mln vs consensus $178.4 mln
* Mobile phone sales in China surge
* Shares rose 36 pct in 2012 vs index's 23 pct rise
By Lee Chyen Yee
HONG KONG, Jan 30 Lenovo Group Ltd is
stepping up its overseas expansion in the smartphone business
after enjoying solid growth at home in China, as the world's
No.2 maker of personal computers seeks to offset slowing growth
in the traditional PC sector.
Lenovo, also the second-biggest smartphone vendor in China,
has begun selling smartphones in countries including Russia,
Indonesia, the Philippines and Vietnam, although analysts said
it faced stiff competition from major players like Samsung
Electronics Co Ltd and Apple Inc.
In its October-to-December third quarter, Lenovo shipped 9.4
million phones, including 9 million smartphones, mainly in
China, where its smartphone business turned profitable for the
"For the rest of the emerging markets, we will continue to
invest in the smartphone business to drive market share," Yang
Yuanqing, Lenovo's chief executive, told a media briefing after
announcing its best-ever quarterly profit. "When we have enough
market share, we can shift to (focusing on) profitability."
The ThinkPad maker reported on Wednesday a quarterly profit
of $204.9 million, up by a third from a year earlier. That beat
the average estimate of $178.4 million in a Thomson Reuters
I/B/E/S poll of 11 analysts, and exceeded its previous record of
around $172 million in the three months that ended in December
In the third quarter, overall revenue grew 12 percent from a
year earlier to $9.4 billion, but the bulk of that still came
from its PC business.
Lenovo has rapidly gained market share in the PC sector on
the back of acquisitions over the past few years. The company
trails Hewlett Packard Co by a slim margin in PC
shipments, according to technology research group IDC.
As PC demand growth slows, Lenovo has been diversifying into
the mobile device sector to tap robust demand for smartphones
and tablets, particularly at home in China, the world's biggest
market for mobile phones and personal computers.
About a tenth of its third-quarter revenue came from its
mobile internet and digital home (MIDH) business - mainly
consisting of its smartphone sales in China, which jumped 77
percent to $998 million.
"In my opinion, Lenovo's strategy in mobile devices is that
it will focus initially on the overseas markets that it's most
familiar with and this includes emerging markets," Eve Jung, an
analyst at Nomura Equity Research.
"However, it will face challenges in the sector as companies
like Acer and Asustek roll out cheaper tablet PC models to
aggressively target markets, such as China, which is Lenovo's
traditional stronghold," she said.
In smartphones, Lenovo will have to compete head-on not only
with major global players, but also with Chinese rivals like
Huawei Technologies Co Ltd and ZTE Corp
, which are already among the top five smartphone
"Its strategy in diversifying into smartphones has proved
quite successful in China, but it'll be quite difficult for
Lenovo to be as successful as say, Samsung, in overseas
markets," said Audrey Chiu, a manager at the investment and
research division of Truswell Securities Investment Trust, which
invests in Lenovo's shares.
Shares of Lenovo rose 36 percent in 2012, outpacing a 23
percent rise in the Hang Seng Index and beating rivals
Hewlett Packard, Dell Inc and Acer Inc, whose
stocks fell last year.
On Wednesday, Lenovo shares closed down 2.7 percent prior to
the results announcement, compared with the Hang Seng's 0.7