Lenovo Delivers Strong Growth and Hits Milestones in First Quarter 2014/15

  • Record high PC market share approaching 20% and strong momentum in mobile
  • Revenue of US$10.4 billion
  • Pre-tax income of US$264 million and earnings of US$214 million
  • Basic EPS of 2.06 US cents, or 15.97 HK cents
  • Net cash reserves of US$3.58 billion (as of June 30, 2014)

HONG KONG — (BUSINESS WIRE) — August 13, 2014 — Lenovo Group today reported results for its first fiscal quarter ended June 30, 2014, with quarterly revenue of US$10.4 billion, an 18 percent increase year-over-year while quarter pre-tax income increased 22 percent year-over-year to US$264 million. Earnings grew 23 percent year-over-year to US$214 million, while the Company hit market share and financial performance milestones.

Lenovo maintained its number three ranking in smart connected devices growing shipments by 28 percent year-over-year. It has been the world’s largest PC maker for five consecutive quarters with its highest-ever quarterly market share of 19.4 percent* up 2.7 points year-over-year, driven by big share gains in EMEA and the Americas. Lenovo’s PC shipments for the first fiscal quarter were up 15 percent to 14.5 million units, the 21st quarter in a row that Lenovo outperformed the industry as a whole. In tablets, Lenovo became the 3rd largest vendor with 2.3 million devices shipped, a growth of 67 percent or nearly 8 times the pace of this market. In smartphones, Lenovo sold more smartphones than PCs for the first time ever with record volume of 15.8 million units, up 39 percent. Despite fierce competition in China, Lenovo became the number 1 smartphone vendor in this country with 13 million phones sold.

The Company’s gross profit for the first fiscal quarter increased 13 percent year-over-year to US$1.3 billion, with gross margin at 13 percent. Operating profit for the quarter grew 40 percent year-over year to US$283 million. Basic earnings per share for the first fiscal quarter was 2.06 US cents, or 15.97 HK cents. Net cash reserves as of June 30, 2014, totaled US$3.58 billion.

“This has been a quarter of milestones for Lenovo – record PC share, a number three ranking in worldwide tablets for the first time, and an even stronger number four global smartphone position,” said Yuanqing Yang, Chairman and CEO of Lenovo. “As the PC industry recovers, the smartphone market continues its shift from premium to mainstream, and our acquisitions of Motorola Mobility and IBM x86 proceed toward completion, we see even more opportunity to keep growing rapidly. Lenovo continues to outperform the market and meet our commitments to improve profitability in our core businesses, while building strong pillars for future growth across our entire portfolio.”

GEOGRAPHIC OVERVIEW

China totaled US$3.8 billion in revenue in the first fiscal quarter, an increase of 2 percent year-over-year, accounting for 36 percent of the Company’s worldwide revenue. Lenovo protected the China profit pool and improved margins there by 0.3 points year-over-year to achieve operating margins of 5.5 percent. Operationally, it strengthened its leadership in PCs with 37.1% share. According to IDC, Lenovo surpassed Samsung to become the largest smartphone maker in the country. In mobile devices, Lenovo continued to improve profitability with broadened routes to market and a greater focus on internet-enabled, open market sales.

In Europe/Middle East/Africa (EMEA), Lenovo had an extremely strong quarter with revenue increasing 49 percent or US$921 million year-over-year to reach US$2.8 billion, or 27 percent of Lenovo’s first quarter worldwide revenue. EMEA saw record highs in PC share and operating margin, hitting the number one position in notebooks for the first time and achieving a number one position in 15 EMEA countries, while smartphone shipments surpassed 1 million devices for the first time. During the quarter, Lenovo’s PC shipments in EMEA increased 4.8 share points year-over-year in the quarter, to reach an all time high of 18 percent.

In Asia Pacific, Lenovo’s revenue was up $270 million to reach US$1.6 billion in the first quarter, or 15 percent of the Company’s worldwide revenue. Lenovo’s PC market share in Asia Pacific was up nearly two share points year-over-year to reach 15 percent. Smartphone shipments in the region were 1.5 million units, up 3.7 times from the same quarter a year earlier. Operating profit margin in the region was 4.1 percent, up dramatically from 0.9 percent a year earlier. Lenovo grew its number one position in Japan, while improved performance in this market drove the region’s robust profitability improvements.

In the Americas, revenue was US$2.2 billion in the first fiscal quarter, an increase of 19 percent year-over-year, comprising 22 percent of the Company’s worldwide revenue. Operating profit margin was 1.1 percent, a 0.3 point decrease compared to last year as the Company continued investments in Latin America and Brazil. The Americas saw a record high PC market share of 12.5 percent, up 23.7 percent or 3 market share points year-over-year, as well as record share in the United States of 11.3 percent, which was up 1.5 points year-over-year.

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