Homepage
Forum
Drivers
HMM
MTM
Feed
News and Commentary Last Update as at 31 Oct 16:39 (HKT)Lenovo expected to post strong Q2 results on brisk PC sales
HONG KONG (Thomson Financial) - Lenovo Group Ltd, one of the world's largest personal computer makers, is expected to announce on Thursday a strong set of results for the fiscal second quarter to September as robust demand for personal computers bolstered sales.
The Chinese PC manufacturer is expected to report net profit of 60-125 million US dollars in the period from 38 million a year earlier, with sales likely growing 14 percent to 4.2 billion dollars.
Sales to the Asia-Pacific and China markets remained major growth drivers in the period, said analysts, while the continued turnaround of the US operations also supported earnings.
The big jump in Lenovo's notebook computer sales also lifted profits in the period.
"We look for another strong quarter, with sales of 4.2 billion US dollars and net profit of 60 million US dollars" after the PC maker recorded solid growth in PC shipments in the period, said Citigroup analyst Kirk Yang in a research note.
Shipments were up 23 percent to 5.5 million units in the quarter, higher than the industry shipment growth rate of 16 percent, said Yang citing data from consulting firm IDC.
The growth in the volume of shipments was also "impressive" in the quarter as the computer maker shipped 3.1 million desktop computers, up 12 percent from a year earlier and faster than the industry's 3.2 percent, he said.
Notebook shipments reached 2.4 million in the quarter, up 42 percent from a year ago and higher than the industry's at 37 percent.
Lenovo's improving operations in the US, which account for nearly 30 percent of the company's sales, also supported results.
"We saw continuing turnaround in Lenovo's US operation," Yang said.
US shipments of notebook computers grew 24 percent, ahead of the industry rate of 18 percent, while desktop volume slipped 6.4 percent against industry growth of 3.6 percent.
"It was the first time Lenovo's notebook PC shipments grew more than the market since acquisition of the IBM business," said Yang.
Lenovo acquired IBM's ailing PC division for 1.25 billion US dollars in 2005, but expenses related to lay-offs and corporate restructuring have weighed since then.
"We expect the turnaround in the US operation will continue over the next few quarters when corporates start adoption of MS Vista ... early next year, as Lenovo has a large corporate PC exposure especially in the US market," Yang said.
Lenovo bought Window office suites from Microsoft Corp in a 1.3 billion dollar deal in May. Lenovo was one of the first computer makers to pre-install Windows on its products.
Credit Suisse gave the most optimistic forecast for Lenovo's third quarter results among investment houses polled by Thomson Financial.
"We expect Lenovo to return a profit of 125 million US dollars in the September quarter, up 86 percent quarter-on-quarter," said Credit Suisse analyst Venugopal Garre.
Garre said earnings will "appear good because of weak profits last year" when Lenovo booked losses due to efforts to integrate the IBM business.
"Regionally, Asia Pacific appeared to be the key growth driver for Lenovo, while growth in the U.S. and EMEA (Europe, Middle East and Africa) was in line with market growth," said Garre.
Asia Pacific accounts for 13 percent of Lenovo's sales, while EMEA accounts for 13 percent.
China remains Lenovo's biggest market, accounting for 39 percent of total sales, Credit Suisse said.
Lenovo holds the biggest market share in Asia excluding Japan but faces fierce competition from industry leaders Hewlett-Packard and Dell Inc in the US and other markets.
Lenovo is currently battling it out with Taiwan's Acer Inc for the No. 3 spot, trailing HP and Dell.
Lenovo shares ended Wednesday up 69 Hong Kong cents or 8.6 percent at 8.73 dollars ahead of the earnings release. Shares surged to a fresh record of 8.99 dollars earlier in the day.
(1 US dollar = 7.8 Hong Kong dollars)
leonora.walet@thomson.com
lw/cl
MMMM
Information provided by AASTOCKS Disclaimer
http://hk.finance.yahoo.com/q?s=0992.HK