Lenovo sales up 15 percent, sells mobile phone division for $100M

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Lenovo sales up 15 percent, sells mobile phone division for $100M

Despite strong financial results for its third fiscal quarter of 2007/08 and increased PC shipments in Asia Pacific (excluding China), Lenono has sold its entire interest in its mobile handset business to a private equity group led by Hony Capital, the private equity arm of Legend Holdings, for US$100 million.

Lenovos sales for the quarter, which ended December 31 2007, jumped 15 percent year over year, to US$4.6 billion. This was largely driven by the year-over-year growth of 22 percent in Lenovo PC unit shipments and sales across all of the company’s geographies.

Lenovo’s Notebook computers continued to be the largest contributor to total sales. Notebook shipments in the third fiscal quarter were up 38% year over year, and sales were US$2.6 billion, or 56% of total sales for the quarter.

In the quarter, Lenovo’s Desktop shipments rose 12% year over year, posting strong volume and sales share gains. Sales were US$1.8 billion in the quarter, or 40% of total sales.

The vendor’s operating profit margin for the third quarter of 2007/08 was 4.4 percent, compared to 2.4 percent in the same period a year ago, and up 0.4 percentage points sequentially, evidence of the Company’s operating efficiency efforts.

For the third quarter of 2007/08, Lenovo reported pre-tax income of US$192 million (excluding restructuring) and basic earnings per share of US$0.193 cents, or HK15.01 cents. Net cash reserves as of 31 December 2007, totalled US$2.0 billion.

William J. Amelio, Lenovo’s president and CEO, said, the global PC market is expected to grow in the double digits in 2008, given strong outlooks in Asia and emerging markets.

“We also expect to see an impact from the recent extension of our product offerings to include higher-margin products, such as workstations and servers, to further balance our product portfolio, said Amelio.

Its Asia Pacific (excluding Greater China) PC shipments increased 20 percent in the third fiscal quarter. Sales in Asia Pacific totaled US$535 million in the third quarter, or 12 percent of total sales.

Lenovo Greater China posted US$1.8 billion in sales in the third fiscal quarter, up 16 percent year over year, as the Company’s 26 percent growth in PC shipments outpaced the industry average for the Greater China market. The growth further strengthened Lenovo’s leading market position in China’s PC market, with a market share of about 29.0 percent, up 0.3 percentage points from a year ago.

The Americas accounted for US$1.2 billion in sales in the third fiscal quarter, or 25 percent of total sales. The continued rollout of the transaction-based sales model contributed to success in the region, which experienced double-digit volume and sales growth year over year. (The transaction-based sales model targets consumers and small business customers.)

Lenovo PC shipments in the Americas during the quarter increased 15 percent, despite increasing economic uncertainty and turmoil in the credit and equities markets in the US

In the Europe, Middle East and Africa region (EMEA), shipments jumped a robust 24 percent in the third fiscal quarter. For the same period, sales totaled US$1.1 billion, or some 24 percnet of total sales.

However things aren’t looking up for the hardware vendor’s mobile phone division. Shipments of Lenovo’s Mobile Handsets, conducted primarily in China, showed a decrease of 31 percent in the quarter. Handset shipments generated sales of US$108 million, or 2 percent of total sales, as the handset business continued to represent a smaller portion of total sales.

Lenovo has decided to sign a conditional sales and purchase agreement to sell its entire interest in its mobile handset business to a private equity group led by Hony Capital, the private equity arm of Legend Holdings, for US$100 million.

The transaction is conditional upon Lenovo independent shareholder approval. The business sells mobile handsets and related equipment predominantly in China.
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