ahsingjai
08-10-2005, 05:10 PM
Lenovo reports rise in profit
The No. 1 PC maker in China says its purchase of IBM assets has paid off; net profit up 6%.
August 10, 2005: 12:16 PM EDT
http://money.cnn.com/2005/08/10/news/international/lenovo.reut/index.htm
HONG KONG (Reuters) - Top Chinese personal computer maker Lenovo Group Ltd. posted a better-than-expected 6 percent rise in quarterly profit Wednesday after including the struggling PC business bought in May from IBM for the first time in its results.
The $1.25 billion purchase made Lenovo the world's third-largest PC maker, behind only Dell Inc. (Research) and Hewlett-Packard Co. (Research), but some analysts are worried about the firm's ability to turn around the IBM (Research) assets.
Lenovo said the former IBM business was profitable, and that the acquisition was already paying off, citing growth that outpaced the industry in the big emerging markets of China, India, Russia and Brazil.
"We are generating the anticipated benefits of the acquisition quickly, ahead of schedule. Customers are embracing the new Lenovo," the new chief executive, Stephen Ward, said in a statement.
After the deal closed in May, Ward, who joined Lenovo from IBM, sent a letter to employees saying he aimed to double Lenovo's profit within three years.
"Lenovo outpaced the PC industry in emerging markets, and we are focused on driving similar momentum in mature markets," Ward said Wednesday.
The firm said it expects the merger to generate cost savings of about US$200 million a year.
Lenovo controls more than a quarter of China's PC market, the world's second largest after the United States, and its landmark deal to acquire IBM's assets is part of a broader move by Chinese companies to look overseas for new growth opportunities.
Lenovo reported a net profit of HK$357 million ($45.94 million) for the quarter through June, compared with a profit of HK$336.8 million in the same period a year earlier, which did not include the IBM assets.
The results released Wednesday included two months of contribution from the former IBM business.
Basic earnings per share fell by 8 percent to 4.12 Hong Kong cents as a result of dilution from issuing new shares to pay for the IBM deal.
Three analysts polled by Reuters had predicted an average first-quarter profit of HK$310 million, although they and others said forecasting would be difficult until they saw more information about the IBM assets.
Sales soar
First-quarter turnover more than tripled to HK$19.6 billion from HK$5.9 billion a year earlier, as Lenovo added IBM's sprawling global sales network, complementing its own position as China's dominant PC seller.
Its gross margins expanded to 15.3 percent, from 13.75 percent a year earlier.
Overall PC sales in China are expected to grow 13 percent from the 15.8 million units sold in 2004, market research firm IDC has said.
But with Lenovo controlling 26 percent of the market last year -- 32 percent including IBM's share -- most analysts believe the company is unlikely to boost its dominance at home and might even lose share to global rivals Dell and Hewlett-Packard.
Analysts have blown hot and cold on the IBM purchase since it was first announced in December, applauding Lenovo for its attempt to expand abroad while also worrying about its ability to turn the assets around.
Lenovo shares dropped sharply after the deal was announced, but have rallied recently amid growing optimism. They jumped 5.61 percent Wednesday to close at HK$2.825 ahead of its results report amid a broad Hong Kong market rally.
Its stock is now nearly 6 percent above its level when the deal was announced in December.
In the first two months that the IBM PC arm was integrated into Lenovo, the firm said its business in the Americas generated operating profit of HK$249 million on sales of HK$5.5 billion.
In Europe, the Middle East and Africa, Lenovo earned operating profit of HK$40 million on turnover of HK$3.7 billion in May and June, while its Asia-Pacific business outside of Greater China lost HK$29 million on an operating basis, on sales of HK$2.5 billion during the two months.
The No. 1 PC maker in China says its purchase of IBM assets has paid off; net profit up 6%.
August 10, 2005: 12:16 PM EDT
http://money.cnn.com/2005/08/10/news/international/lenovo.reut/index.htm
HONG KONG (Reuters) - Top Chinese personal computer maker Lenovo Group Ltd. posted a better-than-expected 6 percent rise in quarterly profit Wednesday after including the struggling PC business bought in May from IBM for the first time in its results.
The $1.25 billion purchase made Lenovo the world's third-largest PC maker, behind only Dell Inc. (Research) and Hewlett-Packard Co. (Research), but some analysts are worried about the firm's ability to turn around the IBM (Research) assets.
Lenovo said the former IBM business was profitable, and that the acquisition was already paying off, citing growth that outpaced the industry in the big emerging markets of China, India, Russia and Brazil.
"We are generating the anticipated benefits of the acquisition quickly, ahead of schedule. Customers are embracing the new Lenovo," the new chief executive, Stephen Ward, said in a statement.
After the deal closed in May, Ward, who joined Lenovo from IBM, sent a letter to employees saying he aimed to double Lenovo's profit within three years.
"Lenovo outpaced the PC industry in emerging markets, and we are focused on driving similar momentum in mature markets," Ward said Wednesday.
The firm said it expects the merger to generate cost savings of about US$200 million a year.
Lenovo controls more than a quarter of China's PC market, the world's second largest after the United States, and its landmark deal to acquire IBM's assets is part of a broader move by Chinese companies to look overseas for new growth opportunities.
Lenovo reported a net profit of HK$357 million ($45.94 million) for the quarter through June, compared with a profit of HK$336.8 million in the same period a year earlier, which did not include the IBM assets.
The results released Wednesday included two months of contribution from the former IBM business.
Basic earnings per share fell by 8 percent to 4.12 Hong Kong cents as a result of dilution from issuing new shares to pay for the IBM deal.
Three analysts polled by Reuters had predicted an average first-quarter profit of HK$310 million, although they and others said forecasting would be difficult until they saw more information about the IBM assets.
Sales soar
First-quarter turnover more than tripled to HK$19.6 billion from HK$5.9 billion a year earlier, as Lenovo added IBM's sprawling global sales network, complementing its own position as China's dominant PC seller.
Its gross margins expanded to 15.3 percent, from 13.75 percent a year earlier.
Overall PC sales in China are expected to grow 13 percent from the 15.8 million units sold in 2004, market research firm IDC has said.
But with Lenovo controlling 26 percent of the market last year -- 32 percent including IBM's share -- most analysts believe the company is unlikely to boost its dominance at home and might even lose share to global rivals Dell and Hewlett-Packard.
Analysts have blown hot and cold on the IBM purchase since it was first announced in December, applauding Lenovo for its attempt to expand abroad while also worrying about its ability to turn the assets around.
Lenovo shares dropped sharply after the deal was announced, but have rallied recently amid growing optimism. They jumped 5.61 percent Wednesday to close at HK$2.825 ahead of its results report amid a broad Hong Kong market rally.
Its stock is now nearly 6 percent above its level when the deal was announced in December.
In the first two months that the IBM PC arm was integrated into Lenovo, the firm said its business in the Americas generated operating profit of HK$249 million on sales of HK$5.5 billion.
In Europe, the Middle East and Africa, Lenovo earned operating profit of HK$40 million on turnover of HK$3.7 billion in May and June, while its Asia-Pacific business outside of Greater China lost HK$29 million on an operating basis, on sales of HK$2.5 billion during the two months.