Lenovo Reports Third Quarter 2009/10 Results

• Quarterly sales of US$4.8 billion
• Operating profit of US$99 million
• Highest ever worldwide market share of nine percent
• Lowest ever (post-acquisition) E/R ratio of nine percent
• Profit attributable to equity holders of US$80 million
• Basic EPS of 0.86 US cent, or 6.67 HK cents
• Net cash reserves of US$2.4 billion (as of December 31, 2009).
HONG KONG, February 4, 2010 (Business Wire / ME NewsWire): Lenovo Group today reported results for its third fiscal quarter ended December 31, 2009. During the third quarter, Lenovo’s worldwide PC shipments increased 42 percent year-over-year, helping the Company to achieve for the third straight quarter its highest market share ever at nine percent. Comparatively, industry PC shipments increased 17 percent worldwide during the same period.
For the third straight quarter, Lenovo achieved its lowest expense to revenue ratio since the acquisition at nine percent, and recorded its second straight quarter of profitability since last year’s restructuring.
Consolidated sales for the third fiscal quarter increased a record 33 percent year-over-year to US$4.8 billion. The Company’s gross profit for the third quarter grew 45 percent year-over-year, with gross margin at 11.1 percent. By comparison, gross margin for the same reporting period last year was 10.2 percent.
Operating profit for the third fiscal quarter was US$99 million, double the profit of the previous quarter. The Company recorded one-off expense items of US$43 million as well as a net gain of US$43 million from the disposal of its investments during the quarter. As a result, the Group recorded a profit before tax of US$94 million. Profit attributable to equity holders for the quarter was US$80 million, almost a complete reversal year-over-year, when compared to the Company’s 2008/09 third fiscal quarter’s loss attributable to equity holders of US$97 million.
Basic earnings per share for the third fiscal quarter was 0.86 US cent, or 6.67 HK cents. Net cash reserves as of December 31, 2009, totaled US$2.4 billion.
During the third fiscal quarter, Lenovo announced its intention to acquire the entire interest of Lenovo Mobile Communication Technology Ltd. from a group of investors led by Hony Capital, the private equity arm of Legend Holdings, for consideration of approximately US$200 million in cash and Lenovo shares. This acquisition, which has since been approved by the independent shareholders of the Company, signaled Lenovo’s intention to immediately expand its participation in the rapidly expanding mobile Internet device market in China.
"The Board is especially satisfied with the performance of Lenovo in this quarter. This is not only because of its outstanding performance, but also of the impressive successes of our new products launched last month at the CES. The Lenovo management is forward-looking and strong in strategic planning. It has already started to deploy a development strategy that integrates innovation into business model, technology and management," said Lenovo Chairman Liu Chuanzhi. "Mobile Internet is a growing demand worldwide. In China, the government is currently driving the convergence of the three networks (telecom, broadcast and the Internet) by formulating new standards. This gives the computer industry, especially Lenovo, significant opportunities for development."
"For the first time since the acquisition of IBM PCD, Lenovo was the fastest growing PC company in the world. We have achieved our highest ever global market share for the third straight quarter and notably increased profitability. These achievements demonstrated the effectiveness of the strategies we mapped out at the beginning of the year," said Yang Yuanqing, Lenovo CEO. "In the future, while we continue to expand our PC business, we also want to attack the mobile internet category to drive growth and capitalize our innovation efforts."