Lenovo: China smartphone profit to fund emerging markets push

Lenovo Group's smartphone business in China will soon turn its first profit, enabling it to fund a handset push into emerging markets.

The company's CEO Yang Yuanqing, told Bloomberg in a Friday interview it will soon start making money in the Chinese smartphone market, and improve its profit not only in absolute dollars, but also in pretax income ratio.

As Lenovo introduced its first touch-screen handset in China in 2010, and expanded sales to Russia, India, Indonesia, Vietnam and Philippines over the last six months, Yang said the company can boost its pretax margin by one percentage point in the next three years, to more than three percent, from 2.4 percent recorded in the September quarter.

"[We] have to invest in new areas but [at the same time, we] must manage the profit growth as well," Yang said. "Even though we will further invest in new areas, we are still committed to our shareholders."

Yang also added the company planned to use the dominant position in PCs to expand in mobile devices, including smartphones and tablet computers. If the company cannot improve their existing business such as smartphones in China, they will not have the money invest in new areas such as smartphones in emerging markets, he said.

Over the weekend, it was reported the Chinese PC maker was restructuring into two business group--Lenovo Business Group and Think Business Group--to efficiently target the mainstream and high-end segments.

The Chinese PC maker took the number one PC maker spot from Hewlett-Packard in the third quarter of 2012, according to Gartner figures. However, research firm IDC disagreed, saying that Lenovo was still second.