10 August 2005 Chinese hardware maker Lenovo has released its first set of results since it acquired IBM’s ailing PC business. While the acquisition has helped bolster Lenovo’s market share, it still faces the challenge of turning the loss-making former IBM unit profitable.
Lenovo reported that revenues for its first quarter for the period ending June 2005, were HK$ 19.6 billion (€613.8m), compared to HK$5.9 billion (€35.1m) in the same period a year ago.
Much of that increase comes from the $1.3 billion (€1.0bn) acquisition of IBM’s PC business. Lenovo’s figures include two month’s worth of sales from the IBM acquisition.
However, despite the increase in revenues, Lenovo only posted a 6% increase in profits. For the quarter its profits were HK$357 million (€37.1m), compared to HK$337 million (€35.1m) in the previous year’s quarter.
The tiny increase in profits has been welcomed by Lenovo executives. In the first half of 2004, before the sale, IBM’s PC unit lost $139 million (EU112.4m) on sales of $5.2 billion (EU4.2bn).
“We are generating the anticipated benefits of the acquisition quickly, ahead of schedule,” said Lenovo’s CEO Steve Ward. “Lenovo outpaced the PC industry in emerging markets, and we are focused on driving similar momentum in mature markets,” he added.
According to industry watcher IDC, worldwide shipments grew by 16.6% in the second quarter of 2005.
Lenovo now comes in at third place in IDC’s worldwide PC shipments league table, with a 7.6% market share, behind Dell and Hewlett-Packard who take first and second place with respective market shares of 19.3% and 15.6%.