Lenovo earnings up 34% as China smartphone business makes profit

Lenovo earnings up 34% as China smartphone business makes profit

Lenovo is close to possibly surpassing HP and taking the top spot for world's largest PC vendor

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Lenovo's net profit for its fiscal third quarter grew by 34% year over year, as the company also reported that its smartphone business in China had become profitable for the first time.

For the quarter ended December 31, Lenovo's net profit reached a record $205 million, the company said this morning. Revenue totalled $9.4 billion, an increase of 12% from the same period a year ago.

The Chinese company is within striking distance of overtaking rival HP for the top spot as world's largest PC maker. In the quarter, HP had a market share of 16.7%, according to preliminary results from research firm IDC. Lenovo was just 1% point behind.

PC shipments drove the company's strong growth, reaching a record high of 14.1 million units. Almost half of Lenovo's revenue, 43%, come from China, now the world's largest market for PCs. It has been the nation's largest PC vendor since 1997, and currently has a 36.7% share of its market, according to the company.

But outside of China, the company's sales have also been growing, despite the sluggish PC market. Lenovo said it made "significant inroads" into the high-end consumer segment in North America for the first time, with its sales of Windows 8 convertible devices.

Earlier this month, Lenovo said it would reorganise its operations. This is leading to the creation of a so-called "Think Business Group", which will develop premium products for commercial and consumer segments and is expected to make use of the ThinkPad brand name.

While Lenovo's business mainly focuses on PCs, the company's smartphones are also gaining market share in China. In last year's third quarter, the company ranked as the second largest smartphone vendor in the country and trailed behind Samsung, according to IDC.

Lenovo's Mobile Internet and Digital Home business group, which includes its smartphones, saw its revenues increase 77 percent year-over-year to almost $1 billion in the quarter. This made up 11 percent of the company's total sales, with its smartphone business in China becoming profitable.

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