Lenovo rides China to strong Q4

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Hong Kong, May 20: : World No. 4 PC maker Lenovo Group Ltd is likely to post a doubling in quarterly earnings, helped by a one-off gain from selling its cellphone arm, and is expected to weather a US slowdown because of its dominant position in the resilient China market.

A deceleration in technology spending in the United States has forced bigger rival Dell Inc to shed jobs and shake up its business, but analysts say Lenovo, which also vies with Hewlett-Packard Co and Acer, should fare better because of a commanding presence at home and in emerging markets.

"There is a continuous slowdown in IT spending in the United States, but overall, given the fact that emerging markets continue to have very strong PC demand, global PC demand should not necessarily collapse. So we don't see a global PC downturn," said Citigroup analyst Jim Liang.

"Even if there is a moderation of global PC demand, we think Lenovo will outperform the overall industry due to its exposure to emerging markets."

Liang expected China's largest PC maker to post 10 percent revenue growth in the June quarter over the March quarter, compared with a flat or slight fall in the industry, due to Lenovo's unique seasonality.

The firm often outperforms in the April to June quarter, after launching promotions toward the end of the fiscal year in March.

Including a $66 million gain from selling its loss-making mobile business, Lenovo is expected to post a profit of $129.2 million for January-March, according to five analysts polled by Reuters, more than double its $60 million profit a year earlier.

But excluding that one-time disposal gain, Lenovo should post a mere 5.3 percent growth in quarterly earnings to $63.2 million. That's a drastic deceleration from a near-tripling in net profit in the past two quarters.

Competition is taking its toll. The firm's less-than-stellar operational performance comes despite racking up 21 percent growth in shipments globally in the January-March period.

It held 6.9 percent of the worldwide PC market in the quarter, up from 6.6 percent a year earlier, according to IT consultants IDC.

In Asia excluding Japan, Lenovo expanded its leading market share to 16.4 percent in the first quarter from 15.8 percent a year ago on unit growth of 23.7 percent.

COMMANDING CHINA