Lenovo Group Ltd managed to buck the trend in a year where most of the other personal computer makers withered. The world's largest PC maker on Thursday reassured investors with a healthy PC business, growing enterprise unit and not-too-bad smartphone sales in its annual results.
The Beijing-based company reported net income of $997 million for 2014, up 22 percent year-on-year. Its gross profit for the full year surged to $6.7 billion. Lenovo, listed in Hong Kong, said its PC shipments increased by 2.7 percent year-on-year in the company's fourth quarter that ended on March 31. The company said its market share improved across all regions.
The PC business continued to be the main profit generator for Lenovo amid competition from United States rivals Hewlett-Packard Co and Dell Inc. Yang Yuanqing, Lenovo chairman and chief executive, said he expected the firm will control about 23 percent of the global PC shipments by next year. Lenovo accounted for 19.6 percent of the shipments by the end of March, according to International Data Corp.
"The vendor continued to aggressively court expansion outside of Asia, especially closing the gap with competition in Europe and the Middle East," said an IDC report. "It also moved ahead of Apple to capture the third position in the US during the first quarter of the year."
Following the acquisition of IBM Corp's x-86 server unit, Lenovo incurred a loss of $45 million. However, the company said the enterprise business group is on track to become a $5 billion business.
The biggest achievement for Lenovo was to maintain its third position in the global smartphone market. Although buying the Motorola Mobility brand from Google Inc made Lenovo look stronger in the high-end market, the loss-making unit contributed little to its market share growth.
The company was forced to keep pace with Apple Inc even as it had to stave off challenges from firms like Xiaomi Corp, Samsung Electronics Co and Huawei Technologies Co Ltd.
CK Lu, principal analyst at research firm Gartner Inc based in Taiwan, said: "We don't yet see the synergy between Lenovo and Motorola. To retain its third position, Lenovo needs to make better use of the Motorola brand and technology, especially in overseas markets, as well as in its relations with Google."
Lenovo's Yang said the integration of Motorola Mobility and System x businesses are underway and realizing good growth momentum. But he admitted it will take some time for the units to become core businesses, like PCs.
At a media interview on Thursday evening, Yang underlined the importance of transforming the company into a swift, flexible enterprise that can quickly respond to emerging market changes.
Dell ready for the PC challenge
Gaining a stable growth trajectory in the Chinese personal computer market is the key for Dell Inc to challenge Lenovo Group Ltd, said David Schmoock, president of Dell's global sales and client solutions.
Maintaining the market share makes more sense for Lenovo, which owns more than 30 percent of the market. For Dell, which has about 11 percent of the share, it means the company has 89 percent of the customers to win from other vendors, Schmoock said, adding Dell's market share in China may grow to about 16 percent in five years.
Dell is rising to become a strong challenger of Lenovo in China. Antonio Wang, a Beijing-based analyst at research firm International Data Corp, said the Texas-based company has been outperforming most of the players in the consumer electronics market with smartly designed products and action against scalpers in lower-tier cities.
"Dell knows the Chinese market well, and executes its plans like a local company," Wang said.
The PC market has remained stagnant in China due to a slowing economy. With Lenovo gunning for a 40 percent market share, it becomes difficult for companies like Dell to maintain steady growth.
"We want our shares to grow when the market grows. But we also want to grab market share from others, when the chips are down," Schmoock said.
Besides the consumer market, the company is finding ways to get more customers from enterprise users and government procurement deals.
The US company has pledged wider, deeper collaboration with Chinese partners to make it easier to acquire deals from the government and State-owned enterprises. A number of US tech firms are complaining that the rising restrictions on IT security will see overseas players losing ground to local vendors such as Lenovo and Founder Group.
"We are focusing on achieving objectives while following the rules," Schmoock said.
"We looked at the share positions and the market opportunity we can service and we are confident that we can find ways to grow."
