Lenovo's Q1 shows 'record high' market share, profits up 30 percent to $141 million

After delivering an overachieving laptop, Lenovo has delivered financial results that also exceeded expectations, producing $8 billion in revenue and $141 million net profit. Those figures are up 35 and 30 percent respectively over last year, which the company has chalked up to a higher than ever market share of 15 percent. That growth came in part from a 59 percent sales bump in emerging markets like India and Brazil, on top of a 9 percent spurt in its home market -- lifting the company 24 percent in world-wide PC shipments for the quarter. Lenovo has also become the second largest player in China's smartphone market, after Samsung, now up to a 13 percent market share. CEO Yang Yuanqing also proclaimed that, unlike other Redmond partners, he wasn't stressed about Microsoft's Surface tablet -- and that his company had "much better hardware" than the software giant.

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- Record market share of 15 percent
- Quarterly sales of US$8 billion
- Net income of US$141 million
- Basic EPS of 1.37 US cents, or 10.63 HK cents
- Net cash reserves of US$3.7 billion (as of June 30, 2012)

HONG KONG, August 16, 2012 – 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.