Despite 'challenging' outlook, Lenovo pledges to expand

Facing a gloomy economic outlook, Lenovo will focus on expanding its business in key market segments, including emerging markets and netbooks, the company said Friday.

"The group expects the global economic environment to remain challenging for the rest of the fiscal year and to continue impacting its performance," the company said in a filing that announced its results for the first half of its fiscal year.

Hit by slower PC shipments, aggressive pricing by competitors, and a stronger U.S. dollar, Lenovo reported net profit fell 22 percent year-on-year to US$134 million on revenue of $8.5 billion during the six-month period that ended on Sept. 30, it said.

"Though Lenovo continued to perform well in its principal segments of business -- commercial, premium products and China, the natural disasters in China and the unprecedented global economic crisis had adversely affected these business segments," the filing said.

"The growth in these segments lagged the overall industry growth which was driven by the consumer segment and low price notebooks," it said, reporting that its worldwide computer shipments grew 11 percent during these six months compared to the same period last year.

In October, IDC reported that worldwide PC shipments grew by 15.8 percent during the quarter ended on Sept. 30. By comparison, the research firm pegged Lenovo's growth during this three-month period at 7.7 percent.

"Lenovo struggled to gain traction as small business spending slowed," IDC said in a statement.

China remained a bright spot for Lenovo. Greater China, which includes mainland China, Hong Kong and Taiwan, accounted for 43 percent of Lenovo's revenue and PC shipments there grew by 14 percent, faster than the market average, it said. But slowing commercial demand and aggressive price cuts by competitors hurt Lenovo in Europe and North America.

Similarly, "execution issues" in India and Japan resulted in flat sales, offsetting growth in other Asian countries. Lenovo's filing did not detail the specific issues that hurt its performance in India and Japan, but said it has taken measures to resolve them and is seeing progress in India.

The IDG News Service is a Network World affiliate.