While most of the world’s PC manufacturers are dealing with falling sales, Lenovo has been seemingly immune to the effects of the traditional PC market’s contraction posting yet another large growth in earnings for the first three months of its financial year spurred on by rapidly growing smartphone sales.
Lenovo’s profits for the three months ending in June is up to $214 million up from $174 million, or 23%, in the same period just year earlier on the back of $10.4 billion in revenue, miles ahead of the $202 million estimates that analysts were expecting.
Those staggering revenue numbers are still generated mostly from Lenovo’s PC business which it acquired from IBM in 2005 but Lenovo isn’t waiting around to see whether it can weather the storm longer than its rivals, instead it has focused its energies into a massive low-end server division, which it is in the process of acquiring from IBM for $2.3 billion and mobile phones, of which Lenovo is attacking from two different directions.
Lenovo’s homegrown smartphones have overtaken Samsung in sales in China but are coming under increasing pressure from Xiaomi who sells its handsets with almost no margin in China through a variety of eCommerce platforms and topped the recent stats for sales in the lucrative Chinese market. Outside of China, where Xiaomi is still a fledgling operation, Lenovo has seen growth rates of 300% and 500% in sales in Southeast Asia and Eastern Europe which helped drive handset sales for the company up by 39%.
The other, arguably more anticipated, plan for Lenovo’s smartphone growth is the planned acquisition of Motorola’s handset division from Google for $2.9 billion which Lenovo CEO Yang Yuanqing says is “on schedule for closing.”
Yang has stated that he sees Motorola becoming profitable within four to six quarters of being taken over by Lenovo. “They (Motorola) have a good plan to improve,” Yang said. “Since Google acquired Motorola, they have started to develop new products. I think now it’s time for them to harvest that investment.”
We recently went on a tour of Lenovo’s factories in Beijing – click here to see how Lenovo assembles smartphones and tablets.