Lenovo Q1 net profit climbs 23 per cent as smartphone sales surge

BEIJING - China's Lenovo Group, the world's biggest maker of personal computers, said net income jumped 23 per cent in the first fiscal quarter, beating estimates, as it consolidated its position in the PC market while boosting smartphone shipments.

Net income rose to US$214 million (S$267.27 million) in the three months through June from US$174 million in the same period a year earlier. That was ahead of estimates of US$202 million, according to a Thomson Reuters SmartEstimate poll of analysts.

The ambitious Beijing-based hardware company has agreed acquisitions worth over US$5 billion this year alone, buying server and handset businesses in what it calls its "PC Plus"strategy to diversify away from the shrinking PC market. Over the past year it has displaced South Korean giant Samsung Electronics Co Ltd to become the No. 1 smartphone seller in China, according to recent estimates by IDC.

For the first quarter, Lenovo reported 39 per cent growth in worldwide handset shipments, helped by strong sales in China. Revenue for the quarter rose 18 per cent to US$10.4 billion, with significant gains coming in Europe.

Lenovo's core PC business, which still accounts for roughly 82 per cent of sales, continued to tighten its grip on the market despite a prolonged decline in the broader industry. Lenovo's laptop sales rose 12 per cent over the year while global laptop shipments fell 3.7 per cent, the company said.

The company this year struck agreements to acquire IBM's low-end server unit and Motorola's handset business from Google Inc. Both deals hinge on US regulatory approval, which analysts say could come as early as the third quarter of 2014.

In a statement, Lenovo Chief Executive Yang Yuanqing said the company's top priority remained closing the two deals, worth a combined US$5.2 billion. "While our top priority now is full participation in the regulatory approvals process, I am confident that from day 1 after closing, these businesses will quickly begin contributing to our performance and develop into pillars for long-term, sustainable growth," Yang said.