Lenovo reports flat 3rd Quarter profit By Vincent Lam (China Daily) Updated: 2005-02-05 10:18
Lenovo Group Ltd, a leading IT enterprise in China, announced profit was flat
in its fiscal third quarter financial report on Friday, in line with
expectations.
The group's operating profits climbed to HK$370 million (US$47.4 million) -
up 19 per cent from HK$311 million (US$39.87 million) over the same period last
year as revenue for its core PC business rose 4 per cent and its earnings per
share (Basic) rose 4.37 cents from 4.35 cents, up 0.5 per cent.
The group's net profit in the third quarter stood at HK$327 million (US$41.9
million), up 0.6 per cent compared with HK$325 million (US$41.67 million) over
the same period last year because of stiff competition and slowing growth in its
home market for its PC business.
The net profit for the first three quarters in this fiscal year reached
HK$954 million (US$122 million).
The company's gross margin also dropped to 13.84 per cent from 14.08 per
cent, down 0.3 per cent.
The turnover slipped to HK$6.309 billion (US$808.85 million) from HK$6.552
billion (US$840 million), down 3.7 per cent.
PC business including corporate IT and consumer IT accounted for 92.8 per
cent of turnover, while handheld devices only accounted for 6.6 per cent.
The total Lenovo PC shipment increased by 19.1 per cent with its notebook
shipment rose 28.1 per cent while its server shipment dropped 17 per cent.
Yang Yuanqing, the CEO of Lenovo, said: "The group will focus on the
development of core business and strategic new business for its future
development."
According to IDC, the proportion of non-core business in total turnover
reduced from 6.1 per cent to 0.6 per cent in the third quarter of this year over
the period of the last year.
Furthermore, the group will be determined to enhance operational efficiency
as the rate of operating expenses of core business dropped to HK$52 million
(US$6.67 million), down 1.2 per cent from 8.9 per cent to 6.9 per cent. Its cash
cycle also dropped from 14.42 to 0.34 days in the third quarter of this year
over the same period of last year, Yang said.
As far to the takeover deal of IBM's PC business is concerned, Yang said on
Friday at a press conference: "Lenovo also is upbeat to see the approval from
the United States to buy IBM's PC business."
He said that he was confident the group's first step of internationalization
to acquire IBM's PC business would gain US approval in the second quarter of
this year, citing that "we haven't received any signs or notification of
disapproval" so far.
On December 8, Lenovo and IBM announced a definitive agreement for Lenovo to
acquire IBM's global PC business at US$1.25 billion on IBM's desktop marketing
networks and notebook computer businesses, as well as its Pc-related R&D
centres, manufacturing plants, global marketing networks and service centres in
order to reduce its dependence on a home market nearing saturation levels in
major cities.
The deal also includes the use of the IBM brand without further payment for
five years, and permanent ownership of the globally known "Think" trademark.
IBM will hold 18.9 per cent of Lenovo's total shares, becoming a long-term
strategic partner of Lenovo.
