Lenovo Q3 profit steady as acquisitions bump up revenue

Revenue at the Chinese hardware manufacturer grew 31 percent compared to Q3 last year as Lenovo bedded in its Motorola and System x purchases.
Written by Chris Duckett, Contributor

Lenovo's core PC business, which was responsible for 81 percent of revenue at this time last year, now only contributes 65 percent of revenue, third-quarter statements for the company showed.

Over the quarter, the PC group made $9.2 billion in sales, which Lenovo said consisted of 16 million PC units, and gave it a record pre-tax income of $494 million. Growth in the PC business sat at 5 percent year on year, with the company now claiming 20 percent market share in the PC market.

Lenovo's mobile group, which Motorola and Lenovo branded handsets, tablets, and TVs, provided $3.4 billion in revenue. Motorola contributed $1.9 billion in sales from over 10 million devices -- more than double its Q3 2013 performance. The company said Motorola is due to re-enter China soon, and will be profitable in less than two years. The mobile group generates approximately 60 percent of its revenue outside of China.

The enterprise group, which includes the recently closed $2.3 billion acquisition of IBM's former x86 server business, posted $1.2 billion in sales, of which the System x business unit made $986 million. The company said System x is on track to becoming a $5 billion business with better margins within the year.

For the entire company, revenue was up 31 percent YoY to $14 billion, gross profit was up 54 percent to $2 billion, while net income fell 5 percent to $253 million. Expenses related to acquisitions totalled $74 million for the quarter.

"This quarter, we are at the starting line of a new race, but the results show that we have the right strategy, we made the right acquisitions," said Yuanqing Yang, chairman and CEO of Lenovo.

"The two newly acquired businesses are achieving great momentum in their first quarter of integration. They are definitely becoming our growth engines."

Sales breakdown by regions showed that China contributed $4.1 billion in revenue, EMEA totalled $4 billion, the Americas brought in $4.3 billion, and the Asia-Pacific accounted for $1.7 billion.

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