A Lenovo Group Ltd LePad, a tablet computer that runs on Google Inc's Android operating system, is displayed during the 2011 International Consumer Electronics Show in Las Vegas. Andrew Harrer / Bloomberg

PC maker says recovery in mature markets offset a decline in China

BEIJING - Lenovo Group, China's largest computer maker by market share, has reported a 25 percent jump in net profit in the fiscal third quarter.

The better-than-expected numbers came as strong business recoveries in mature markets and expansion in overseas emerging markets helped to compensate for a slowdown in China's PC industry.

Net income increased to $99.7 million, in the three months ended Dec 31, from $79.5 million a year earlier, according to the company.

Lenovo now plans launch its LePad tablet computer in China next month and in international markets by May, as part of its effort to fend off increasing competition from rivals such as Apple Inc.

Liu Jun, president of Lenovo's newly established Mobile Internet and Digital Home Business Group, said in an interview on Thursday that he has great expectations for the long-awaited tablet computer.

"We have bigger expectations for the LePad than LePhone smartphones because it is closer to our core business - computers," said Liu.

He said the company aims to accrue a greater share of the tablet computer market with the new device than it currently holds in the traditional PC industry.

Liu said the LePad, an Android-based device that has a detachable screen, will be sold at $400 to $1,000 depending on the different configurations. The device can also play Flash videos and will have many features tailored for the domestic market.

With its popular iPad tablet, Apple has accelerated its expansion in China during the past few months, including opening more stores and increasing product supplies to the world's second-largest PC market.

Other rivals, such as Samsung and some domestic vendors, have also launched their own tablet computers in China.

Yang Yuanqing, Lenovo's chief executive officer, said on Thursday that the popularity of tablet computers in China has had some effect on sales of desktop and laptop computers.

However, he estimated that the company's tablet computer will end up taking 15 to 20 percent of the domestic PC market after the debut fever fades.

According to figures from the research company IDC, China's PC market only grew by four percent in the fourth quarter of last year. The slowdown was mainly due to the government's recent policies aimed at curbing surging commodity prices.

"Considering the country's lower PC penetration, China's PC market still has a great potential," said Antonio Wang, an analyst from IDC, who noted that the market is expecting a strong recovery in the second half of the year.

Lenovo's Yang said that China's PC market usually grows two times faster than the country's GDP growth and the average PC penetration rate in China is only about one-fifth of that in the United States.

He added that China's smaller cities and rural areas are the top priorities for Lenovo's future domestic expansion.

Last month, the company announced that it will establish a new unit targeting mobile devices, which have a higher profit margin than computers.

Lenovo's chairman, Liu Chuanzhi, said at the World Economic Forum in Davos last month that the new LePad tablet and LePhone are the key to survival against Apple, according to Bloomberg, which quoted him as saying, "Anyone who loses this battle will be phased out of the history of this industry."

Shipments of its LePhone reached 230,000 units in the last quarter, a 100 percent increase over the previous quarter, according to Lenovo.

Global shipments grew by 21 percent during the last quarter of 2010, the fastest rate among top PC brands, according to IDC. The overall market growth was 2.7 percent during the period, IDC said.

China Daily

(China Daily 02/18/2011 page16)