Lenovo Posts Third Quarter 2013/14 Results

Strong execution, innovative products and PC Plus growth drive another record setting quarter

  • Record 32.6 million total units shipped, nearly 5 devices per second
  • Continued to expand lead as number one PC maker with 18.5% market share
  • New PC Plus products excite consumers and drive growth
  • US$10.8 billion in revenue; passing US$10 billion milestone for first time ever
  • Records of US$321 million in pre-tax income and US$265 million in earnings
  • Basic EPS of 2.56 US cents, or 19.85 HK cents
  • Net cash reserves of US$ 3.4 billion (as of December 31, 2013)

HONG KONG — (BUSINESS WIRE) — February 12, 2014 — Lenovo Group today announced record results for its third fiscal quarter ended December 31, 2013, driven by strong global execution, an innovative product portfolio and an increasing mix of PC Plus revenues. Quarterly revenue was US$10.8 billion, a 15 percent increase year-over-year, passing the US$10 billion milestone for the first time ever. Third quarter profit grew even faster with pre-tax income increasing 30 percent year-over-year to US$321 million, while earnings also grew 30 percent year-over-year to US$265 million. Lenovo shipped a record 32.6 million devices in the quarter or nearly 5 devices every second. Lenovo’s third quarter mix of sales from its Mobile Internet and Digital Home division which develops PC Plus products such as smartphones, tablets and smart TVs, was 16 percent of total revenues, up from 11 percent one year ago and seven percent two years ago, with steadily improving profitability.

For the third straight quarter, Lenovo was the world’s largest PC vendor*, with its highest-ever quarterly market share of 18.5 percent, up 2.4 points year-over-year. Record high share in EMEA, Asia Pacific and China with number one positions in five of the seventh largest PC markets globally – supported this strong performance. Lenovo’s PC shipments for the third fiscal quarter were 15.3 million units, again making it the fastest growing of the top five PC vendors. This was also the 19th quarter in a row that Lenovo outperformed the industry as a whole, growing at a 14 point premium to the market.

Also for a third straight quarter, Lenovo’s combined shipments of smartphones and tablets – 17.3 million devices – surpassed the 15.3 million PCs it sold. It also continued to be the world’s fourth largest smartphone supplier with 4.8 percent share, growing shipments 47 percent year-over-year, driven by excellent performance of its smartphone launches in a number of new markets. In tablets, Lenovo had a record high of 3.4 million shipments, up over 300 percent year-over-year. Tablet strength was driven by the launch of the Yoga Tablet, the world’s first multimode tablet. Together, these results clearly illustrate Lenovo’s PC Plus transformation.

“Lenovo had outstanding performance last quarter, delivering both record revenue and record profit. Leveraging strong execution of our strategy, innovative products and growth in our PC Plus business, we continue delivering on our commitment to improve our profitability and we are confident we will maintain this momentum in our existing businesses,” said Yang Yuanqing, Chairman and CEO of Lenovo. “Further, the Motorola and IBM server acquisitions that we just announced are a perfect fit with our PC Plus strategy. While our top priority now is full participation in the regulatory approvals process, I am confident that from day 1 after closing, these businesses will quickly begin contributing to our performance and develop into pillars for long-term, sustainable growth.”

The Company’s gross profit for the third fiscal quarter increased 15 percent year-over-year to US$1.36 billion, with gross margin at 12.6 percent. Operating profit for the quarter grew 37 percent year-over-year to US$334 million. Basic earnings per share for the third fiscal quarter was 2.56 US cents, or 19.85 HK cents. Net cash reserves as of December 31, 2013 totaled US$3.4 billion.

GEOGRAPHIC OVERVIEW

Lenovo’s China geography totaled US$4 billion in revenue in the third fiscal quarter, relatively stable year-over-year, accounting for 37 percent of the Company’s worldwide revenue. The performance of China reflected a temporary slowdown in the local PC market which has stabilized and is seeing improved pricing, while urbanization, corporate refresh and PC Plus product innovation are driving future demand. During the third quarter, Lenovo further strengthened its PC number-one position in China, with market share in China of 37.9, a 0.5 point year-over-year gain, was number two in smartphones and number three in tablets.

In the Asia Pacific geography, Lenovo’s revenue totaled US$1.6 billion for the third quarter, or 15 percent of the Company’s worldwide revenue, up 22 percent year-over-year. Solid execution drove strong growth of smartphone sales and tablets saw hypergrowth in ASEAN countries. Lenovo also regained its number 1 position in PCs, with a record market share of 15.9 percent, up 2.0 points year-over-year and reached a milestone of selling 1 million smartphones.

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