Lenovo to push European channel for stronger results

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Chinese market boosts financials

While Lenovo’s strong sales in China helped the company post a 59 percent rise in fourth-quarter net profit, it is more likely that its long term future will depend on its European channel.

The world’s number two  PC maker is opening more channels in the mobile market with smartphones, and tablet PCs targeted.

As Lenovo diversifies, analysts are forecasting the company could overtake market leader HP next year.

It is depending on its European and US channels to pick up as though China’s economy slows down.

Arthur Liao, an analyst with Fubon Securities in Taipei told Reuters that China’s market should be the driver for Lenovo to get to be the top position in the world.

Lenovo posted a net profit of $472.99 million for the fiscal year ended March, it said, versus a Wall Street forecast of $472.2 million.

Lenovo’s results stand in contrast to Dell, the world’s number three PC maker, which posted a decline in quarterly results.

Jonathan Ng, an analyst with CIMB Research in Singapore said that Lenovo was a lesson for Dell.

He said that Dell is focused on high-margin products while Lenovo is aiming for volume sales to gain market share.

Recent rankings showed Lenovo had a worldwide market share of 13.4 percent, lagging HP’s 18.0 percent, but ahead of Dell’s 11.6 percent.

Another reason is that Lenovo can cross-sell consumer products and business products. This should mean higher PE multiples for Lenovo and allow it to push its portfolio beyond the PC space in China.

Lenovo said that its smartphone market share in China reached 9.5 percent in the quarter and its tablets had a dominant position of about half the Android market in China.

The company wants to triple its smartphone shipments this fiscal year from around 5 million in the previous year.

Mature markets such as Japan and Europe make up 42 percent of Lenovo’s business. Emerging markets account for the remaining 16 percent.

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