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November 6, 2009

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Lenovo returns to black as income rises and sales grow

LENOVO Group Ltd returned to the black when it posted a better-than-expected net profit in the third quarter after three consecutive quarterly losses, thanks to growing income from China and other emerging markets as well as improved business in the Western markets.

The world's No. 4 personal computer vendor expects the global PC market to rebound next year because of increasing demand for the new Windows 7 operating system and as enterprises boost their IT budgets, Lenovo said yesterday.

In the third quarter ended September 30, Lenovo's net profit more than doubled to US$53.08 million, from US$23.44 million a year earlier. Its profit also beat analysts' forecast of US$20 million to US$24 million. Its revenue fell 5.2 percent year on year to US$4.10 billion in the period.

"We have come out of the dangerous cliff and now we have a really new start," Lenovo's Chairman Liu Chuanzhi said during a Webcast conference.

Lenovo posted a huge loss for three consecutive quarters and its market share dropped to a low of 6.8 percent. By the end of September, Lenovo's market share rebounded to 8.9 percent, ranking it behind Hewlett-Packard Inc, Dell Inc and Acer Inc.

In the quarter, Lenovo's PC sales jumped 17 percent annually compared with an average 2.3 percent growth of the industry, said Yang Yuanqing, Lenovo's chief executive.

Lenovo China's sales jumped 28 percent annually, which helped the firm consolidate its leading position in the domestic market. Its sales in emerging markets like Russia, Latin America and Turkey also gained while business in the United States and Europe rebounded from a huge loss in the third quarter.

The new Windows 7 will help the PC industry boost revenue and will benefit the likes of Dell, HP and Lenovo, according to Gartner and Ovum research firms.

The global PC market, however, won't totally recover until the second half of next year, analysts said. Meanwhile, Lenovo faces a challenging economy and price rises of PC components such as memory chips and LCD screens, Yang said.

Lenovo announced in February it would lay off 2,500 people, or 11 percent of its work force by March to save about US$300 million.



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