Lenovo annual profit rises 29%

China's Lenovo Group, the world's fourth-biggest smartphone vendor, saw net profit grow 29 percent for the business year ended March, as strong smartphone sales helped shore up weak growth in China.

Lenovo is expanding into smartphones to offset a decline in its once-mainstay personal computers (PC) as consumers switch to mobile devices, to the extent that it agreed in January to buy the Motorola Mobility smartphone unit of Google Inc for $2.9 billion.

The company, which became a global brand in 2005 after buying the PC unit of International Business Machines Corp (IBM), also agreed in January to buy IBM's low-end server unit for $2.3 billion.

Chief Executive Yang Yuanqing said the acquisitions, still subject to US regulatory scrutiny, would weigh on finances in the near term.

However, the acquisitions did not have an impact on net profit for the year through March, which rose 28.7 percent to $817.2 million, Lenovo said in a statement on Wednesday.

Revenue rose 14.3 percent to $38.7 billion. Overall weakness in China was offset by growth outside Lenovo's home market - particularly Europe, the Middle East and Africa (EMEA) and the Americas - as well as a surge in the company's mobile Internet unit, home to its smartphone business.

"Lenovo's smartphone unit shipments achieved a record-high level of over 50 million for the fiscal year, growing by 72 percent year-on-year, driven by growth in China and emerging markets outside of China," the company said in the statement.

Shares of Lenovo were trading 2.5 percent higher after the results, versus a near-flat benchmark Hang Seng Index.

Analysts saw tough times ahead for Lenovo, saying it may take at least until the end of 2014 to make the acquisitions profitable. Meanwhile, smartphone leaders Samsung Electronics Co and Apple Inc will only intensify competition, they said.

Sales in China, though still Lenovo's largest market accounting for almost two-fifths of revenue, rose a mere 1.3 percent to $14.7 billion during the fiscal year.

That was offset by jumps of 27.1 percent for sales in the EMEA region and 31.1 percent in the Americas. The mobile Internet and digital home business unit saw an 86.1 percent rise to $5.7 billion.

In the US, Lenovo's PC market share surpassed Apple in the fourth quarter of the fiscal year to become the third-largest PC vendor, according to a report by Chinese news portal qq.com on Wednesday.