Lenovo Group Ltd. (LNVGY, Financial) reported its quarter reports for the period ended March 31. Net income witnessed a drop of 37% to $100 million. Sales, however, saw an increase during the quarter. Profits posted beat expectations of analysts. On trading day Wednesday, the highest value of shares traded on Nasdaq was $34.52 and the lowest was $34.30. Shares closed at $34.4 on the previous day.
Quarterly and yearly numbers
The net profit for the full year ended March 31, 2015 saw an increase of 1% to $829 million. A group of analysts had estimated the computer technology company to post an annual net profit of $857 million. Revenue for the year also increased 20% to $46.3 billion,slightly below estimates of $46.9 billion. For the fourth quarter, revenue saw an increase of 21% to $11.3 billion. Thomson Reuters had estimated Lenovo would post revenues of $11.98 billion for the quarter. Though the company said that the quarter was a seasonally slow one with negative currency impacts, the 21% revenue increase is satisfactory. Around 18.7 million smartphones were shipped in the quarter alone. For the full year 76 million smartphones were shipped, thus helping Lenovo to remain the third-largest smartphone manufacturer after rivals Samsung (SSNLF, Financial) and Apple Inc. (AAPL, Financial). The statistics seem to be in favor of the company as two acquisitions were made last year. Motorola Mobility was bought for $2.9 billion while the IBM's (IBM, Financial) low-end server unit was purchased for $2.3 billion.
Global business performance
Different businesses also performed well individually. The PC business, which constitutes PCs and Windows tablets, saw an increase in quarterly sales by 11% year over year. The pre-tax margin was 5.5%. The PC businesses also saw an increase in sales in the Western European region along with Africa and Middle East. The Mobile Group business reported quarterly sales of $2.8 billion. The Mobile Group constitutes Android tablets, smart TVs, Lenovo mobiles as well as products from Motorola (MSI, Financial). The Enterprise Business unit posted sales of $1.1 billion. This business unit comprises of storage, software, services and servers.
Revenue from various regions across the world are as follows: Revenue from China was accounted at $3.1 billion for the quarter. The Asian Pacific region reported a $1.7 billion revenue for the quarter that is 15% of the total revenue. Revenue from Europe, Africa and Middle East rose 15% to $3 billion for the quarter. In spite of currency fluctuations, this region saw greater growth and profitability. Revenue from the American region was $3.6 billion, a whooping 85% rise year over year. One region that Lenovo needs to focus on is the Brazilian region. Due to various challenging forces in this region, the overall results of American revenue was affected. Another issue that needs to be addressed is the geopolitical challenges due to the friction between Beijing and Washington. Moreover, the U.S. Navy may even drop its usage of IBM servers due to the acquisition by Lenovo. Therefore, sales of servers may witness a fall in the American region but might compensate in the Chinese region. Customers from China believe that local brands are more secure and that might give an added advantage to Lenovo, Vincent Chen, an analyst at Yuanta Securities,Ă‚ said.
Investor take
Profit attributable to equity holders was $100 million for the quarter as compared to the $158 million posted in the prior year. EPS was 90 cents. For the same quarter last year, Earnings per share was $1.51. For the fiscal year ended 31st March 2015, the company's Board of Directors declared a dividend of $2.64 or 20.5 HK cents to shareholders. Given that CEO and Chairman Yang Yuanqing has given assurance that Lenovo will “spur a new wave of growth,” investors can rest be assured about the performance of their shares. “We are ready to transform ourselves from making mostly hardware to a combination of hardware and software services,” Yang Yuanqing was quoted saying. He also said that the company is continuing in its efforts to deliver better and balanced performances. Though it will take time for Lenovo to make Motorola Mobility and System x their core business, it seem that they know what their doing. Shares have gained almost 50% in the last 12 months, beating the 23% increase in the broader market.
