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Lenovo Profit Beats Estimates as Top PC Maker Widens Lead

Lenovo

Lenovo Group Ltd. profit beat analyst estimates as the world’s biggest PC maker widened its lead over rivals and acquired smartphone and server businesses to boost sales.

Net income for the three months ended March fell 37 percent to $100 million, Lenovo said in a statement. That beat the $91.6 million average of analyst estimates compiled by Bloomberg. Revenue missed estimates in the period, which had “significant currency impacts,” the company said.

Lenovo said personal computer shipments rose to an annual record, with market share rising in all regions. The company also maintained its status as the biggest smartphone maker behind Samsung Electronics Co. and Apple Inc., as it pursues faster-growing businesses including enterprise computing.

“Lenovo’s increasing market share in PCs helped them leverage scale to cut costs and boost margins,” said Vincent Chen, an analyst at Yuanta Financial Holding Co. in Taipei who rates the stock hold. “The rising U.S. currency hurt both demand and their pricing during the period.”

Lenovo fell 0.6 percent to HK$13.28 as of 2:04 p.m. in Hong Kong, after the earnings announcement.

Currency Pressure

Sales for the period climbed 21 percent to $11.3 billion, missing the $12.1 billion average of analyst estimates. Growth would have been 28 percent if not for currency pressure, the company said in the statement Thursday.

Global PC shipments declined 5.2 percent during the quarter as the global replacement cycle faded, researcher Gartner Inc. said last month. European and U.S. demand drove unit sales at Lenovo higher in the period, the researcher said.

The quarter was Lenovo’s first full reporting period to include results from the $2.8 billion purchase of Motorola Mobility from Google Inc., taking its mobile business to 25 percent of revenue from 24 percent in the prior three months.

China, which accounted for 59 percent of Lenovo’s handset shipments last year, experienced its first quarterly decline in smartphone unit sales in six years with both Lenovo, and combined Lenovo-Motorola, losing share, IDC said this month.

Chairman and Chief Executive Officer Yang Yuanqing has previously forecast an end to losses at Motorola within four to six quarters. Gianfranco Lanci, who took the role of president last month, is helming the enterprise business that took over one of International Business Machines Corp.’s server units last year.

Lenovo’s enterprise group, which includes last year’s purchase of the System X business from IBM, posted a pretax loss, which includes non-cash acquisition costs, of $45 million in the quarter. Revenue was $1.1 billion.

Full-year revenue at the unit was $2.63 billion, and is on track for $5 billion sales within a year, the company said today, reiterating previous guidance.