Lenovo Rides Surging PC Sales To 25 Percent Quarterly Profit Increase

Powered by surging PC sales, Lenovo on Wednesday reported financial results for the third quarter of 2010 ending on Dec. 31, exceeding most analyst forecasts, including a 25 percent increase in total profit.

Lenovo's 25 percent earnings boost brought its net profit to $99.6 million for the quarter, up from $79.5 million in the third quarter of 2009. Most analysts expected net profit to come in at close to $86 million, according to Bloomberg. Lenovo's revenue went up 22 percent to $5.8 billion in the quarter. Lenovo's gross margin for third quarter 2010 was 11.2 percent, up from 10.3 percent in the year-before quarter.

"For the fifth consecutive quarter, Lenovo has continued to be the fastest growing among the top five PC manufacturers globally," said Lenovo Chairman Liu Chuanzhi, in a statement. "Volume, revenue, cost and expense, and pre-tax-income targets were all delivered. The outstanding result indicates that the strategy of Protect-Attack and balanced development has shown its effect."

During the third quarter of 2010, China-based Lenovo claimed 32 percent share of its domestic PC market, its highest figure yet. Lenovo's share of the worldwide PC market was 10.2 percent. Lenovo's operating profit for for the third quarter of 2010 was $127 million, a 28 percent increase year-over-year. Lenovo reported a third quarter pre-tax income of $121 million, a 29 percent increase year-over-year.

However, Lenovo says its period of rapid growth has likely passed, as economic uncertainty continues to pervade markets in the U.S., and in Europe.

"Worldwide PC market growth has further moderated in the quarter, and certain challenges in the global economy and the debt crisis in mature markets remain," Lenovo said in a statement.

Despite a sluggish economy and relatively low consumer demand in Lenovo's main markets, Lenovo has seen steady growth in emerging markets. Liu said Lenovo will build on its current market momentum with increased investments in order to build its brand and develop its technology.

Last month, Lenovo reportedly began talks with Japanese hardware company NEC regarding a joint venture in the PC business. The move is part of a trend of Chinese companies investing in Japanese technology.

According to The Financial Times Lenovo has become the fastest-growing PC vendor worldwide, as a result of cyclical changes in the PC industry and changes to the company's internal structure.

Next: Rival Acer's Woes

Rival Acer, meanwhile, posted relatively disappointing financial results for the same period. Acer’s fourth quarter 2010 revenue was down 11 percent year-on-year, partly due to a 28 percent drop in sales in the U.S. Overall, Acer incurred a 15 percent reduction in PC shipments in the fourth quarter of 2010 compared to the previous quarter -- the biggest drop-off of any PC vendor -- just as Lenovo enjoyed a record quarter.

However, Lenovo still sells half of its PCs to customers in China. Despite having one of the most alluring portfolios of tablet devices -- including the LePad tablet and the Idea U1 hybrid device -- Lenovo currently has no U.S. release schedule for its tablet products. Lenovo plans to start selling its LePad tablet device in select markets by the end of March.