Lenovo Group today reported results for its first fiscal quarter ended
June 30, 2012, with quarterly sales of US$8 billion, a 35 percent
increase year-over-year. At the same time, Lenovo’s first quarter
net-income increased by 30 percent year-over-year, to US$141 million,
demonstrating the Company’s ability to maintain profitable growth in a
challenging market.
As the world’s second-largest PC vendor, Lenovo achieved its
highest-ever quarterly market share of 15%* helping the Company to make
significant gains against its competitors. In an industry where overall
PC shipments were down almost two percent year-over-year, Lenovo’s PC
shipments for the first fiscal quarter increased 24.4 percent compared
to last year, the 13th quarter in a row that Lenovo’s growth
has outpaced the PC industry as a whole. And for the 11th
quarter in a row, Lenovo grew faster than any of the top four PC vendors.
Lenovo’s growth was balanced across all geographies, customers segments
and products lines, a result of the Company’s continued focus on
executing its “protect and attack” strategy of reinforcing its business
in established markets while going after potential new markets. As the
industry evolves to the PC Plus era, Lenovo has moved aggressively to
ensure that the Company is well-positioned as the industry shifts to
include more tablets, Smart TVs and smartphones in the product mix.
The Company’s gross profit for the first fiscal quarter increased 30
percent year-over-year, with gross margin at 12 percent. Operating
profit for the quarter grew 48 percent year-over year to US$182 million.
Basic earnings per share for the first fiscal quarter was 1.37 US cents,
or 10.63 HK cents. Net cash reserves as of June 30, 2012, totaled US$3.7
billion.
Two weeks ago, Lenovo announced a global partnership with EMC, forming a
server technology development program that will help drive innovation
and extend Lenovo’s capabilities in x86 industry-standard servers. As
part of this agreement, Lenovo will bring these servers to market on its
own, and embed them in select EMC storage systems over time. Lenovo
replaced a major competitor to establish an OEM and reseller
relationship where Lenovo will provide EMC’s industry-leading networked
storage solutions to Lenovo customers worldwide, starting with China.
Lenovo and EMC have also agreed to a joint venture, majority-owned by
Lenovo, bringing certain assets and resources from EMC’s Iomega business
to develop and sell Network Attached Storage (NAS) products to
small/medium businesses and distributed enterprise sites worldwide.
The agreement with EMC is not material to Lenovo’s earnings.
During the first fiscal quarter, Lenovo also announced the establishment
of the Lenovo Industrial base in Wuhan, China, where the Company will
build an integrated facility focused on the research, development and
production of Lenovo mobile internet and digital home product lines. The
facility is expected to open in October 2013.
"Although the economic environment is somewhat similar to the 2008-2009
downturn, Lenovo’s results are much stronger because we have the right
strategy and great execution,” said Yang Yuanqing, Lenovo Chairman and
CEO. “Our businesses in emerging markets outside of China, our consumer
business and MIDH business all achieved rapid expansion, providing the
balanced pillars to support our overall performance. Our business in
China and our global commercial business maintained strong
profitability, which allows us to secure plenty of resources to invest
in growth areas and ensure the company’s overall healthy performance.
Although we`re in a challenging environment, we are confident that by
continuing to execute our Protect and Attack strategy, Lenovo can
achieve sustainable growth and healthy returns in the PC+ era."
GEOGRAPHIC OVERVIEW**
Lenovo China recorded US$3.5 billion in consolidated sales in the
first fiscal quarter, an increase of 24 percent year-over-year, and
accounting for 44 percent of the Company’s worldwide sales. During the
first quarter, Lenovo further strengthened its number-one position in
China by 3.9 points, which resulted in an industry-leading market share
in China of a record 35 percent, further widening the gap between Lenovo
and its nearest rivals. Lenovo’s PC shipments in China increased nine
percent year-over-year in the quarter, compared to an overall industry
decrease of PC shipments in China of 2.8 percent.
In the Asia Pacific/Latin America region, Lenovo’s PC shipments
for the first fiscal quarter increased 59.2 percent, significantly
outperforming the overall industry, which saw a decrease of 3.9 percent
year-over-year. Consolidated sales totaled US$1.7 billion for the first
quarter, or 21 percent of the Company’s worldwide sales. Lenovo recorded
double-digit market share in the region with 11 percent, gaining 4.4
share points year-over-year. Highlights for the quarter included a
number one position in Japan with 25.4 percent market share,
attributable to Lenovo’s successful integration of its NEC joint
venture, which is entering just its second year of operation. In
addition, Lenovo recorded an all-time high in India of 17 percent share
while growing more than five times faster than the industry as a whole
there, and PC shipments in Brazil increased more than 20 times the
overall industry growth rate in that country.
Lenovo’s PC shipments in Europe Middle East/Africa increased an
impressive 62.3 percent in the first fiscal quarter year-over-year, more
than six times an overall industry growth rate in the region of 9.1
percent. Consolidated sales increased 62 percent year-over-year during
the first quarter, to US$1.6 billion in consolidated sales, or 20
percent of the Company’s worldwide sales. Despite the economic
challenges faced by several European countries, Lenovo gained 2.9 share
points year-over-year. Lenovo’s successful integration of its Medion
acquisition has helped the Company improved its position in Western
Europe. In Russia, Lenovo doubled its PC shipments year-over-year.
North America consolidated sales totaled US$1.2 billion
year-over-year for the first fiscal quarter, an increase of seven
percent year-over-year, comprising 15 percent of the Company’s worldwide
sales. In an overall market that dropped ten percent year-over-year,
Lenovo’s PC shipments grew at an 8.6 percent clip in the first quarter,
with a balanced strong showing in sales to both commercial and consumer
customers. With a record high market share in the United States of eight
percent, Lenovo was able to recapture the number four share position in
the region.
PRODUCT OVERVIEW
Lenovo’s Laptop computers continued to be the largest contributor
to the Company’s sales worldwide, generating 54 percent of Lenovo’s
total sales revenue. Consolidated sales for Lenovo’s laptop PC business
worldwide in the first fiscal quarter totaled US$4.3 billion, an
increase of 23 percent year-over-year. The Company’s laptop shipments
worldwide in the quarter were up 27 percent year-over-year, helping
Lenovo to gain 3.2 share points and achieve a record-high laptop market
share of 15.4 percent. Across the industry, laptop shipments were flat
year-over-year. During the first quarter, Lenovo announced the worldwide
availability of its first ultrabooks, the IdeaPads U310 and U410,
featured in the Company’s new, global “Book of Do” advertising campaign.
Lenovo’s new ultrabooks, combine the best features of traditional
laptops – processing performance, large storage capacity and rich audio
– with the sleek aesthetics and desirable qualities of tablets, such as
fast boot-up, instant resume and all-day battery life.
Consolidated sales of Lenovo Desktop PCs worldwide increased 26
percent year-over-year in the first fiscal quarter to US$2.5 billion, or
32 percent of Lenovo’s total sales revenue. The Company’s desktop PC
shipments worldwide in the first quarter increased 21 percent
year-over-year worldwide, compared to an overall industry decrease of
four percent worldwide. As a result, Lenovo gained three share points
year-over-year and achieved a record-high market share of 14.4 percent.
During the first quarter, Lenovo announced its new ThinkCentre M92p
“tiny” desktop PC, the industry’s first one-litre desktop measuring just
the width of a golf ball (34.5mm). The ThinkCentre M92p exhibits an
innovative tiny form factor allowing it to fit into practically any
space while maintaining first-class productivity. In physical
environments where space is limited, customers are particularly
interested in the “tiny” desktops capabilities.
Having completed its first full-year of operations, Lenovo’s Mobile
Internet Digital Home (MIDH) group reported
that sales
increased 173 percent year-over-year during the first fiscal quarter to
US$587 million, comprising 7% of the Company’s total sales revenue.
Lenovo’s smartphone shipments increased 44 times year-over-year, helping
the Company achieve its first-ever double-digit smartphone market share
at 11.2 percent. Lenovo’s smartphone gains propelled the Company to
improve its overall mobile phone business by 5.1 share points
year-over-year to finish the quarter at a record-high 9.8 percent market
share in China. Overall, Lenovo is now the second largest mobile phone
vendor in China. During the first fiscal quarter, Lenovo announced its
latest tablet, the IdeaTab S2109, designed for entertainment with
features like four SRS surround-sound speakers. The Company also
announced its first smart TV, the 55-inch K91 Smart TV in China, the
world’s Google-certified TV to adopt the Android 4.0 operating system.
*see IDC data 2Q 2012
** Year-over-year geographic comparisons restated from previous China,
Mature Group and Emerging Markets Group
ABOUT LENOVO
Lenovo (HKSE: 0992) (PINK SHEETS: LNVGY) is a US$30 billion personal
technology company – and the second largest PC company in the world,
serving customers in more than 160 countries. Dedicated to building
exceptionally engineered PCs and mobile internet devices, Lenovo’s
business is built on product innovation, a highly-efficient global
supply chain and strong strategic execution. Formed by Lenovo Group’s
acquisition of the former IBM Personal Computing Division, the company
develops, manufactures and markets reliable, high-quality, secure and
easy-to-use technology products and services. Its product lines include
legendary Think-branded commercial PCs and Idea-branded consumer PCs, as
well as servers, workstations, and a family of mobile internet devices,
including tablets and smart phones. Lenovo, a global Fortune 500
company, has major research centers in Yamato, Japan; Beijing, Shanghai
and Shenzhen, China; and Raleigh, North Carolina. For more information
see www.lenovo.com.
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LENOVO GROUP
FINANCIAL SUMMARY
For the fiscal quarter ended June 30, 2012
(in US$ millions, except per share data)
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Q1
12/13
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Q1
11/12
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Y/Y
CHG
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Sales
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8,010
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5,920
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35%
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Gross Profit
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959
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739
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30%
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Gross Profit Margin
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12.0%
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12.5%
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-0.5pt
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Operating Expenses
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(777)
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(616)
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26%
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Expenses-to-Revenue Ratio
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9.7%
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10.4%
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-0.7pt
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Operating Profit
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182
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123
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48%
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Other Non-Operating Income
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3
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0
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NA
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Pre-tax Income
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185
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123
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50%
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Taxation
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(41)
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(15)
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178%
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Profit for the period
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144
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108
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33%
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Non-controlling interests
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(3)
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0
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NA
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Profit Attributable to Equity Holders
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141
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108
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30%
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EPS (US cents)
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Basic
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1.37
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1.11
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0.26
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Diluted
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1.33
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1.08
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0.25
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CONTACTS :
Lenovo Group
Hong Kong
Angela Lee, (852) 2516-4810
angelalee@lenovo.com
or
Beijing
Ma Ling, (86) 10 5886-3525
maling@lenovo.com
or
U.S.
Ray Gorman, 919-257-6325
rgorman@lenovo.com
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