Lenovo Q4: Revenue boost rides on record PC sales

Despite taking financial hits for the acquisition of Motorola and System X, Lenovo is staying on track thanks to record PC sales.

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Lenovo has taken a financial hit in Q4 FY2014/2015, but the firm's fourth quarter financial report does show increased revenue and sales figures.

The Chinese PC maker reported on Thursday Q4 net income of $100 million with earnings of $0.91 cents per share, falling 37 percent from $253 million in the third quarter of FY2014/2015 due to the closure of acquisitions as well as currency fluctuations. ( statement)

Lenovo's Board of Directors declared a final dividend of $2.64 cents for the fiscal year ended March 31, 2015.

Total revenue in the final three months of the fiscal year rose to $11.3 billion, up 21 percent year-over-year, despite what Lenovo says is "a seasonally slow quarter with significant currency impacts." Total operating profit was $127 million in the fourth quarter of FY2014/2015, exceeding expectations and up from $74 million in Q3 2014/2015, even though Lenovo took a $94 million hit in non-cash M&A related accounting charges.

For the full year, Lenovo reported revenue of $46.3 billion, up 20 percent year-over-year. Annual net profit reached $829 million, a slight increase of one percent year-over-year but below analyst expectations.

Analysts polled by Thomson Reuters estimated Lenovo would report a net profit of $857 million.

In the PC Group, which includes PCs and Windows tablets, Lenovo's quarterly sales were $7.2 billion, with pre-tax income of $391 million, up 11 percent year-over-year. Lenovo said the company shipped 13.3 million PCs in the quarter, up 2.7 percent year-over-year, snatching a total market share of 19.5 percent -- a record for the firm. The PC unit performed well across Western Europe, the Middle East and Africa.

In the Mobile Business Group, which includes products from newly-acquired Motorola Mobility, Lenovo-branded smartphones, Android tablets and smart TVs propelled quarterly sales of $2.8 billion. Lenovo says the firm sold 18.7 million smartphone units in Q4 and 76 million overall in FY 2014/15. Across the fiscal year, China accounted for 59 percent of Lenovo's smartphone sales.

In terms of tablets, Lenovo shipped 12 million units, an increase of 26 percent year-over-year. Motorola contributed over 7.8 million units in the quarter to Lenovo's total, up 23.6 percent year-over-year, and added $1.8 billion to Lenovo's mobile group revenue totals.

Lenovo says the Motorola group "hit a major operational milestone by re-entering China" this year, and remains on track to be profitable within 4-6 quarters of close.

In the Enterprise Business Group, which includes servers, storage, software and services, sales were $1.1 billion. In its second full quarter with System x, acquired last year, the unit delivered positive operational pre-tax income, however accounting charges reached $45 million.

Yang Yuanqing, Lenovo Chairman and CEO commented:

"The integrations of Motorola Mobility and System x businesses are on track and realizing good growth momentum, although further time will be required to develop them before they become core businesses like PCs.

In view of the opportunities and challenges of the new Internet+ era, we are ready to transform ourselves from making mostly hardware to a combination of hardware and software services. This will spur a new wave of growth for Lenovo in the coming years."

In related news, Micro-Star International recently quashed rumors the hardware and gaming laptop manufacturer was in talks with Lenovo over a potential acquisition of its gaming laptop division. MSI went so far as to infer the rumors were damaging and began hunting the source of the rumor with the promise of potential legal action.

At the time of writing, Lenovo stock is $13.28 cents a share. Share price dipped at market close after the earnings annnouncement.

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