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Lenovo Group Limited (LNVGY) Seeks to Bring Chinese Success to U.S Smartphone Markets

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Lenovo Group Limited (ADR) (NASDAQOTH: LNVGY)Lenovo Group Limited (PINK:LNVGY), the second largest personal computer (PC) manufacturer, views the smartphone market as a new channel to drive growth in the company. Yang Yuanqing, Lenovo’s Chairman and CEO, believes the PC market presents limited growth for the company’s future success. Mr. Yuanqing wants his company to start selling its smartphones in the U.S market within a year.

Impressive Earnings

Lenovo Group Limited (PINK:LNVGY) boosted investor confidence with its latest earnings report. For its fiscal year ending March 31, the company reported a net profit of $126.9-million, up 90% year-over-year (YOY) from $66.8 million. Revenues ballooned to $7.8 billion, up 4.5% YOY. The company recorded a gross profit of $963 million, up 20% from last year Gross margins remain strong, sitting at 12.3%. Operating profit climbed to $169 million, up 67% YOY. Lenovo’s Board of Directors declared a final dividend of 1.81 cents for the fiscal year ended March 31, 2013.


Beijing-based Lenovo Group Limited (PINK:LNVGY) introduced its first smartphone to customers in China during the first fiscal quarter of 2010, following the acquisition of Lenovo Mobile to tap into the growing market for mobile Internet devices. Since then, Lenovo has competed well in China—the biggest smartphone market by volume—against its local rivals ZTE Corp., Coolpad and Huawei Technologies Co.

In the quarter ended March 31, Chinese consumers purchased 67.4 million smartphones. Samsung Electronics topped the Chinese smartphone market with its Galaxy line of smartphones in the mid-low price segments. According to research firm Strategy Analytics, Samsung sold 12.5 million smartphones and gained 18.5% market share, up 2.2% from the previous quarter. Lenovo Group Limited (PINK:LNVGY) sold 7.9 million smartphones and captured 11.7% market share. Samsung may continue to deliver strong volumes in China and global markets during the second quarter with its highly demanded flagship Galaxy S4 smartphone.

Huawei edged Lenovo with 12% market share, placing Lenovo as the second largest local smartphone vendor.

Shipments (millions) Market
Samsung 12.5 18.5%
Huawei 8.1 12%
Lenovo 7.9 11.7%
Coolpad 7.0 10.3%
ZTE 6.4 9.4%
Apple 6.1 9%

Strategy Analytics

On May 16, Lenovo Group Limited (PINK:LNVGY) released the K900 in China—the company’s latest smartphone. Lenovo wants to increase its market share in price segments where it lacks presence. The K900 retails for a suggested price of ¥3,299 (about $538). It targets the high-end smartphone market where customers search for different options other than Samsung’s Galaxy S4 and Apple Inc. (NASDAQ:AAPL)‘s iPhone 5. The K900 aims to fulfill that demand.

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