Lenovo market share a concern
While mainland personal computer giant Lenovo Group is generally expected to post lacklustre first-quarter earnings today, analysts are more concerned about whether the company is winning its battle to retain market share.
Estimates for Lenovo's earnings for April to June range from US$258 million to $304 million, according to five sector analysts polled by the South China Morning Post.
A mean figure of US$286 million represents 2.7 per cent year-on-year growth from the $278.3 million net profit in the period last year.
According to market research firm IDC, Lenovo's computer shipments in the period increased 15 per cent year on year, compared with 23 per cent growth in the overall market.
Lenovo's handset manufacturing business, which lost US$75 million in the quarter to March, is expected to continue to drag down earnings.
'Lenovo needs scale for its handset business to break even and an acquisition would also help,' said Kirk Yang of Citigroup Smith Barney in a report.
Hampered by the handset losses and competition from international rivals, analysts assumed Lenovo's margins for the quarter would be under pressure.
Profits will also be hit by restructuring expenses incurred over the quarter, as the company refocuses on its core computer business.
To combat the problem, the company will transfer non-telecommunications-related IT services business to AsiaInfo, introduce Dell-style direct sales for corporate clients and sell budget computers to the low-end market.
'First-half PC shipment growth remained healthy despite the launch of China's austerity programme in the second quarter,' Credit Suisse First Boston said.
'If China's economic activities are affected by power shortages in the second half, demand for IT products could also be affected.'
