Lenovo bucks market slowdown with bumper profits

May 23, 2013 | 11:40

Tags: #financial #pc-market #post-pc #slowdown #slump #smartphone #tablet #thinkpad

Companies: #ibm #lenovo

The PC slowdown might be hitting many high-tech companies hard, but you wouldn't be able to tell by looking at Lenovo: the company has just posted record profits on the back of massively increased sales.

Founded in 1984, Chinese Lenovo hit the big time when it acquired IBM's personal computer business in 2005 - giving it the right to produce laptops under the well-regarded ThinkPad brand. While not all of its decisions have gone quite as well - it famously sold off its smartphone and tablet division in 2008 for $100 million, only to change its mind and buy it back a year later for $200 million - the company has seen steady growth in the mobile computing arena.

Steady, that is, until its most recent quarterly earnings report. Despite its rivals complaining of flagging profits, slowing sales and the looming spectre of the so-called "post-PC" era - in which buyers stop picking up desktops and laptops in favour of tablets and smartphones - the company has had a bumper quarter. Figures released by the company late last night show a 90 per cent gain in profits year-on-year from $66.8 million this time last year to $126.9 million in the last quarter.

The whopping growth comes as the global PC market continues to shrink, the hoped-for sales boost from the launch of Microsoft's Windows 8 operating system having never materialised. Some of that growth, naturally, comes from Lenovo's smartphone and tablet arm - but the company has sustained previous levels of desktop and laptop sales, increasing its market share to the cost of its competitors. In doing so, it has become the only one of the top five PC makers not to see its shipments slide.

The good performance its final quarter has led Lenovo to a record annual income of $801 million based on $34 billion in sales - suggesting that Lenovo, unlike its competitors, isn't feeling the pinch of the market slowdown. That, however, would appear to be primarily thanks to its tablet and smartphone arm: desktop PC shipments held steady during the quarter, while its laptop division saw sales decrease two per cent year-on-year. Smartphone shipments, by contrast, grew 206 per cent in the fourth quarter.

That isn't to say that Lenovo is becoming a smartphone company, of course: laptops still accounted for 53 per cent of the company's overall sales for the quarter, despite the slip in shipments. Lenovo's position as one of the very few companies in the PC market to show growth, however, does show a couple of things very clearly: PC makers without "post-PC" strategies are going to struggle in the coming years, and Lenovo's $200 million buy-back of its hastily-sold tablet and mobile division may have been a sound investment after all.
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