Lenovo reports quarterly revenue tops $10b

It's the first time the PC vendor has broken through the milestone

Lenovo Group Ltd on Thursday reported its quarterly revenue broke through the $10 billion barrier for the first time because of strong global demand.

Top executives also explained to shareholders how they are going to maximize profit gains from the recent acquisitions that cost Lenovo more than $5 billion.

The world's largest personal computer vendor said the revenue in its third fiscal quarter that ended on Dec 31, 2013, stood at $10.8 billion, a jump of 15 percent year-on-year.

Earnings also surged 30 percent compared with a year ago to $265 million.

Yang Yuanqing, chairman and chief executive officer of Lenovo, said business in PC-plus areas, including smartphones, tablets and servers, was driving profit growth.

"The Motorola (Inc) and IBM (Corp) server acquisitions are a perfect fit with our PC-plus strategy," said Yang.

He also tried to calm investors who were questioning the company's profitability after spending $3 billion to acquire the money-bleeding Motorola Mobility from Google Inc. Motorola Mobility makes Android smartphones and Bluetooth accessories. Yang said the business will quickly begin contributing to the company's performance.

But Yang was hesitant to estimate his company's earnings prospects, saying the two acquisitions are still awaiting approval from the United States government. Consequently, the effect on short-term earnings are difficult to predict.

"Buying Motorola is a quicker way for Lenovo to access the premium smartphone market with a leading Android offering than trying to do it with its existing design teams and brand reach," said Frank Gillett, vice-president and principal analyst at Forrester Research.

"Using Motorola, just as Lenovo used the IBM ThinkPad brand, to gain quick credibility and access to desirable markets and build critical mass, makes a lot of sense," added Gillett.

Sun Qi, vice-president of industry consultancy Sino-Market Research Ltd, also believes the Motorola unit will extend the Chinese company's performance in global markets.

Lenovo was the second-largest smartphone maker in China last year with more than 40 million shipments, according to Sun.

Lenovo's quick move into portable device markets has given the company an upper hand in future competition, analysts said.

In the past quarter, Lenovo's revenue surged in Europe, the Middle East and the Americas. Sales outside China contributed more than 60 percent in revenue, according to its financial report.

"Lenovo was early to embrace Android as a tablet operating system while the likes of HP (Hewlett-Packard Co) and Dell (Inc) waited for Windows 8 and prioritized margins over volume," said James Wang, an analyst at Canalys.

"Lenovo's strategy has paid off, not only in its home market but worldwide. Lenovo still has the potential to grow its global notebook shipments and has emerged as a challenger in the tablet space," added Wang.

The analyst said Lenovo shipped three times as many tablets worldwide in the past quarter as HP and Dell combined.

Lenovo CEO Yang said earlier the company will challenge Samsung Electronics Co and Apple Inc globally, using a bigger product spectrum and more affordable prices.