On February 1, 2007, LENOVO announced excellent 3rd Quarter results. I commented live on CNBC-TV. Read comments on LENOVO’s results below.
Comments on LENOVO’s 3Q results
LENOVO (traded on the the Hong Kong stock exchange) for 3Q announced 23% higher profits compared to 3Q one year ago. Revenue increased slightly to US$ 4 billion, making LENOVO a US$ 12 billion/year company. LENOVO is very successful in it’s home market China, where it controls more than 35% of the PC market. While shipments in China rose 17% during the quarter ending Dec 31, 2007, global sales only increased 0.4%, held back mainly by performance problems and falling sales in the Americas. Globally, LENOVO is squeezed between ACER below, which grows much more rapidly (ACER’s growth was 32.4% in 3Q2006 compared to one year ago while LENOVO’s growth was only 10.1%) and Hewlett-Packard and Dell above. While Dell was struggling recently, Michael Dell came back as CEO of Dell, and I expect Dell to improve and become a much more difficult competitor for LENOVO. LENOVO’s challenge is to turn around the US operations, where it is losing ground. To do so, LENOVO will need to strengthen sales to consumer markets, maybe by learning attractive product design by watching APPLE, since competing on price will further hit profits. LENOVO risks to be overtaken globally by ACER.
Comments on LENOVO
LENOVO is more important than it’s size of US$ 12 billion in sales suggests for the following reasons. LENOVO is one of the first Chinese companies developing a global brand and a global business. With China’s growing economic importance on the world stage, if LENOVO manages to turn-round US operations and becomes globally successful, it’s management structure and methods may become a model for other Chinese companies to globalize. It is interesting to compare LENOVO’s relative success after the acquisition of IBM’s PC business with BENQ’s acquisition of SIEMENS-Mobile phones. If LENOVO succeeds to turn-round US operations, LENOVO may become a model case for futher take-overs of Western companies by Chinese companies. LENOVO is owned 27.3% by the Chinese Academy of Science. If LENOVO succeeds and continues to expand it’s success story, financial benefits will flow back to the Chinese Academy of Science, strengthening China’s science base and contributing to China’s further development. LENOVO is also China’s largest domestic mobile phone maker, after recently overtaking Ningbo-Bird. LENOVO sold 2.1 million mobile phone handsets in 3Q2006, a market share of 6.2%, and annual sales on the order of 8 million phones. This number is far below NOKIA’s sales on the order of 350 million phones/year globally, and recently global phone makers have been gaining ground over local makers in China. However, LENOVO does have a chance sometime in the future to become a global mobile phone player in the way SAMSUNG has succeeded.
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