UPDATE 1-Lenovo Q3 net slows for 3rd straight quarter

* Q3 results up 54 pct, though growth slowed

* Gross profit margin down from a quarter earlier due to component shortage

* Europe crisis, hard disk drive shortage are key challenges for PC sector

HONG KONG, Feb 9 (Reuters) - China’s Lenovo Group Ltd posted third quarter net profit that beat forecasts, though growth slowed for a third straight quarter, with the world’s No.2 PC maker highlighting the Europe crisis and a hard disk drive shortage as key challenges for the global PC sector.

Analysts said Lenovo, which last year edged out Dell Inc to rank behind market leader Hewlett Packard Co in PC sales, would need to increase market share in the fast-growing tablet PC and smartphone sector as traditional PCs and laptops have become commoditised.

The company has been diversifying into smartphones and tablet PCs with its LePhone and LePad devices, although market share still lags that of major players such as Apple Inc and Samsung Electronics Co Ltd.

“Although challenges to worldwide PC demand remain, such as the pace of global economic recovery and the on-going debt crisis in Western Europe, and even a hard disk drive supply shortage and cost increase, Lenovo remains optimistic that its growth momentum will continue,” it said in a statement.

The Beijing-based, Hong Kong-listed company reported a net profit of $153.46 million for the three months ended December, up 54 percent from $99.65 million a year earlier. That compared with a consensus forecast of $130.2 million from a poll by Thomson Reuters I/B/E/S.

Lenovo has been growing strongly in recent years, propelled by expanding sales in China and acquisitions in mature markets, although weak demand in crisis-striken Europe and hard disk drive supply disruptions stemming from flooding in Thailand last year may continue to crimp growth.

It has also launched an online application store called LeGarden and showcased its first smart TV running Google Inc’s Android operating system “Ice Cream Sandwich” in a bid to boost its brand in the sector.


Lenovo said its profit margin in the third quarter was 11.4 percent, up 0.2 percentage points from a year earlier, though it fell from a quarter earlier due to the impact of hard disk drive supply shortage, which caused cost increases, it said.

In November, a senior Lenovo executive said it aimed to maintain margins in coming quarters even though floods in Thailand have disrupted supply chains for hard disk drives.

Lenovo, formerly known as Legend, has become one of China’s best known brands. It plans to restructure to improve its focus on key markets.

In January, Lenovo said its business will be divided into four regions from April 2 -- China, Asia-Pacific/Latin America, North America and EMEA (Europe, Middle East and Africa), from its existing mature markets, emerging markets and China divisions.

The results came before Thursday’s market opened.

Lenovo shares retreated 2.1 percent in the reporting quarter, versus a 4.8 percent gain on the Hang Seng Index . In 2012 to date, its stock is up a fifth.