Tech giant says it will focus on smartphone, corporate sales in post-PC era

Lenovo Group Ltd reported record sales and earnings results for the past fiscal year amid a global recession in the personal computer market. Company executives said mobile devices and corporate business are set to fuel the company's transition in post-PC era.

A performer promotes Lenovo smartphones at a store in Yichang, Hubei province. The annual net income of Lenovo Group Ltd increased 34 percent to $635 million in the fiscal year ending March 31, the highest in the company's history. LIU JUNFENG / FOR CHINA DAILY

"We are the fastest growing PC vendor globally. Consumer mobile devices and enterprise hardware markets will be our new focus," said Yang Yuanqing, chairman and CEO of Lenovo.

The world's second-largest PC maker in terms of shipment said its full-year sales climbed to $34 billion, a year-on-year increase of 15 percent. Its annual net income reached $635 million, up by 34 percent. Both figures were the highest in the company's history. Lenovo's fiscal year ended on March 31.

In the past quarter, the company paid increasing attention to its smartphone business in hopes the unit will be strong enough to challenge Apple Inc and Samsung Electronics Co Ltd.

Yang said earlier this year that Lenovo's major rivals are consumer mobile device giants rather than traditional PC makers such as Hewlett-Packard Co and Dell Inc.

Fueled by strong smartphone sales, Lenovo said its net income reached $127 million in the fourth quarter, a jump of 90 percent year-on-year.

"The biggest advantage for Lenovo is the company's brand, channel and production capability in China," said Nicole Peng, research director of Canalys China.

Yang said Lenovo is looking for more markets in which to launch its smartphones. The company has a presence in five developing markets and is ready to enter developed markets, where it will face direct challenges from Apple and Samsung.

But analysts said Chinese hardware makers may need more time before taking on the global electronics giants.

"Apple and Samsung invested heavily in software and services to build an integrated user experience, and it is in this area that Lenovo and most other domestic companies still have a long way to go," said Peng.

Out of China — especially in emerging markets — Lenovo will have to demonstrate its ability to bring out innovative features, and integrate the latest technologies and industrial design, she added.

Lenovo had 12 percent of China's smartphone market in the first three months of this year, second only to Samsung, according to industry consultancy iiMedia Research.

"The crucial part of Lenovo's business this year lies in the tablet and smartphone businesses," said Peng. "The smartphone business will depend on Lenovo's performance in the Chinese market, which drives the majority of volume."

In addition, Yang said Lenovo will continue to support its corporate business arm in the new fiscal year because of its high profit margins.

In late April, reports said Lenovo was in talks with IBM to acquire the US company's x86 server business. The two companies did not ink the deal due to price variance.

IBM was seeking $5 billion to $6 billion for its server business, industry website crn.com reported. IBM was the world's top server vendor in terms of revenue by the end of 2012.

"Servers are the pillar for Lenovo's corporate business unit, we will build this arm through mergers and acquisitions when the price is reasonable," said Wong Wai Ming, the company's chief financial officer.

Last year, Lenovo joined hands with EMC after the US company ended a decade-long reseller relationship with Dell, the world's third-biggest PC manufacturer.

Lenovo's idea of entering the consumer and corporate markets came after the global PC market suffered its biggest recession in history.

US research company IDC warned earlier this year that international PC shipments are poised to see a double-digit slump in the second quarter of this year.

Lenovo was the only major PC maker that saw its PC sales increase thanks to the continued demand in Chinese rural areas.

Stock in Lenovo, listed in Hong Kong, closed at HK$7.38 (95 US cents) on Thursday, up 2.79 percent from the previous trading day.