Lenovo ready to challenge mobile industry leaders

Lenovo Group Ltd, the world's largest personal computer maker, said it is ready to challenge Apple Inc and Samsung Electronics Co Ltd in the mobile consumer sector after reporting record-high net revenue for the third fiscal quarter.

The Beijing-based company said its net profits surged to $205 million in the three-month period ending on Dec 31, an increase of 34 percent year-on-year.

Gross profit for the third fiscal quarter reached $1.1 billion, an increase of 15 percent year-on-year, the company said.

"Despite the global economic slowdown, we have outgrown the market in all geographies with record sales," said Yang Yuanqing, its chairman and CEO.

The most important strategy for Lenovo is to further explore mobile devices where Apple and Samsung dominate the market, said Yang, adding that the company may increase its market share through mergers and acquisitions.

Research firm IDC said Lenovo has become the world's third-largest maker of "smart connected devices", including tablets, PCs and smartphones.

During the third fiscal quarter, Lenovo doubled its smartphone sales in China compared to the same period last year, and its smartphone business became profitable, the company said.

Lenovo has sold 9 million smartphones in China over the past three months, the company said, adding the profit in this sector was "very limited". Lenovo claims to have a larger smartphone market share in China than ZTE Corp and Huawei Technologies Co Ltd.

Becoming profitable is only the first step in a long journey as the PC maker strives to enter the mobile industry, analysts said.

"Since Lenovo's smartphone business is starting to become profitable, it is allowing the company to invest more in product development, marketing and building distribution channels, which are key for it to build a sustainable business in the global smartphone industry," said Wang Jingwen, analyst at Canalys.

Yang said Lenovo will put more energy into developing high-end smartphones, a move that will bring the company into face-to-face competition with Samsung and Apple.

It will take longer to generate a profit in overseas smartphone markets, he said, adding that Lenovo will continue to focus on the Chinese market and does not expect overseas markets to generate a profit anytime soon.

China's major telecommunications carriers have offered subsidies to overseas brands, making it difficult for local manufacturers to explore the high-end market, Yang said.

Wang said Lenovo will continue to be one of China's leading smartphone vendors in 2013.

"Lenovo's brand awareness in China's low-tier cities, which will see strong growth in the following years, will allow Lenovo to penetrate quickly in these areas," Wang said.

The company also sells smartphones in emerging markets such as the Philippines, India and Russia, but has been unable to make a profit because of the relatively small market scale.

Lenovo should improve its branding and channel reach both in China and emerging markets, Wang said.