Lenovo’s profits jump 36 percent

dranii@newsobserver.comNovember 8, 2013 

  • Kutcher’s role goes beyond promotion

    Actor Ashton Kutcher is taking his unprecedented dual role as a Lenovo “product engineer” and celebrity pitchman seriously.

    Last week, Kutcher, star of the sitcom “Two and a Half Men,” spent two days – from 8 a.m. to 8 p.m. – in China giving feedback to Lenovo product engineers devoted to designing tablets, said Jay Parker, president of North American operations.

    “He has a lot of tech savvy,” Parker said. “He’s an entrepreneur ... We think he can add value to our product line.”

    Lenovo announced last week that Kutcher has signed a deal that calls for him to collaborate on tablet design as well as to promote Lenovo tablets.

    Kutcher is a co-founder of A-Grade Investments, which has funded companies such as Foursquare and Spotify.

    “He was the first person to get 1 million Twitter followers,” Parker said. Kutcher is known globally for his presence on social media. “We’ll take advantage of that because it ties with our technology play.”

    Staff writer David Ranii

No. 1 computer maker Lenovo bested analysts’ expectations with a 36 percent jump in quarterly profit fueled by its growing share of the global PC market and its increasingly successful diversification strategy.

“This definitely proved that our ‘PC Plus’ strategy is working very well,” CEO Yang Yuanqing said in a conference call with analysts. “We are confident that we can sustain this momentum quarter after quarter.”

PC Plus is what Lenovo calls its strategy of diversifying into other devices such as smartphones and smart TVs. Lenovo doesn’t sell those products in the United States but intends to introduce them here by the end of 2014.

Lenovo’s mobile Internet and digital home products, which include smartphones, smart TVs and tablets, accounted for 15 percent of total revenue compared to 8 percent a year ago.

“The better profit is due partly to its smartphone business and cost control,” HSBC Holdings analyst Jenny Lai told Bloomberg News in an e-mail.

Lenovo reported Thursday that revenue rose 13 percent to $9.8 billion in the fiscal second quarter that ended Sept. 30. Analysts polled by Bloomberg News had been expecting, on average, revenue of $9.41 billion.

Net income totaled $220 million, up from $162 million a year ago. Analysts were projecting $202.7 million in net income.

Lenovo is based in China and has a headquarters in Morrisville, where it employs 2,200 workers.

Despite Lenovo’s prosperity, in May and again in October the company laid off what it described as a “small number of employees” in Morrisville. But the company also says it continues to expand locally.

“To be clear, we’re still hiring in North Carolina,” Jay Parker, the president of North American operations, said in an interview Thursday.

The cutbacks, Parker added, reflect “a shifting of our people and our skill and expertise from back-end operations dedicated to the PC business” to operations focused on other products such as servers, tablets “and, eventually, mobile phones.”

Lenovo’s worldwide PC shipments have outpaced the industry for 18 consecutive quarters, and for the past two quarters it has been the undisputed market leader. But in the third quarter its PC shipments rose just 2 percent, according to market research firms IDC and Gartner, because the overall market sagged.

Lenovo ranks No. 4 in the U.S. PC market. It entered the U.S. market in 2005 when it acquired IBM’s PC business.

“In the U.S., we are now at double-digit market share for the first time ever,” Parker said.

Yang said he expects the PC market to improve over the next few quarters and also sees the expanding tablet market “shifting to our favor.”

Lenovo ranks No. 4 in tablets – behind Apple, Samsung and Asus. In the third quarter it shipped 2.3 million tablets globally, up from $1.5 million in the second quarter and a scant 400,000 units in the year-ago quarter, according to IDC.

Parker said the tablet market is slowly shifting away from premium-priced devices to products that cost less than $300, which plays to Lenovo’s strengths.

“We have a whole suite of products that play really well there,” Parker said.

Last week, Lenovo unveiled a new Yoga tablet that has 18 hours of battery life and carries a suggested retail price of $249 for the 8-inch screen and $299 for the 10-inch screen.

Lenovo’s American depositary receipts, which are akin to common stock, closed at $22.05 Thursday, up 30 cents. Its ADRs have risen 20 percent this year.

Ranii: 919-829-4877

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