China's Lenovo sets sights overseas in smartphone push

Wed Jan 30, 2013 7:38am EST
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By Lee Chyen Yee

HONG KONG (Reuters) - Lenovo Group Ltd is stepping up its overseas expansion in the smartphone business after enjoying solid growth at home in China, as the world's No.2 maker of personal computers seeks to offset slowing growth in the traditional PC sector.

Lenovo, also the second-biggest smartphone vendor in China, has begun selling smartphones in countries including Russia, Indonesia, the Philippines and Vietnam, although analysts said it faced stiff competition from major players like Samsung Electronics Co Ltd and Apple Inc.

In its October-to-December third quarter, Lenovo shipped 9.4 million phones, including 9 million smartphones, mainly in China, where its smartphone business turned profitable for the first time.

"For the rest of the emerging markets, we will continue to invest in the smartphone business to drive market share," Yang Yuanqing, Lenovo's chief executive, told a media briefing after announcing its best-ever quarterly profit. "When we have enough market share, we can shift to (focusing on) profitability."

The ThinkPad maker reported on Wednesday a quarterly profit of $204.9 million, up by a third from a year earlier. That beat the average estimate of $178.4 million in a Thomson Reuters I/B/E/S poll of 11 analysts, and exceeded its previous record of around $172 million in the three months that ended in December 2007.

In the third quarter, overall revenue grew 12 percent from a year earlier to $9.4 billion, but the bulk of that still came from its PC business.

Lenovo has rapidly gained market share in the PC sector on the back of acquisitions over the past few years. The company trails Hewlett Packard Co by a slim margin in PC shipments, according to technology research group IDC.

As PC demand growth slows, Lenovo has been diversifying into the mobile device sector to tap robust demand for smartphones and tablets, particularly at home in China, the world's biggest market for mobile phones and personal computers.   Continued...

Lenovo's laptop PCs are displayed at an electronic shop in Tokyo September 5, 2012. REUTERS/Kim Kyung-Hoon