Lenovo quarterly revenue jumps 31 percent, tops expectations

By Gerry Shih

BEIJING (Reuters) - Lenovo Group Ltd, the world's leading PC maker, said on Tuesday its third-quarter revenue rose 31 percent to $14.1 billion, beating investor expectations, as its mobile division sales more than doubled following its acquisition of Motorola.

The results, released before the Hong Kong Stock Exchange opened Tuesday, sent Lenovo shares 5.7 percent higher in morning trade to HK$10.76, compared with a 0.36 percent fall on the broader Hang Seng index.

Lenovo paid $2.91 billion for Motorola, the U.S. handset brand with a long sales history in the United States and Europe, as part of an effort to diversify away from the shrinking PC market.

Lenovo's results took into account two months of Motorola's performance - the acquisition closed Oct 31 - and the company said Motorola sold more than 10 million handsets during the quarter for the first time.

Chief Executive Yang Yuanqing told Reuters the acquisition will set Lenovo apart from Chinese rivals Xiaomi Inc and Huawei Technologies Co Ltd [HWT.UL], as competition intensifies between them for the title of No. 3 global smartphone maker behind Samsung Electronics Co Ltd and Apple Inc.

"We're not the same as the other Chinese players because now we have become a global player," Yang said.

Xiaomi, in particular, has swept aside Lenovo in China but has largely avoided Western markets due to fears of intellectual property challenges.

Yang pledged to fight back against Xiaomi in China by adopting its rival's Internet distribution model. Lenovo in May signed a deal with e-commerce site JD.com and announced a subsidiary last month to sell smartphones and wearables exclusively online.

Under Lenovo, Motorola will re-enter the Chinese market and be distributed primarily online, Yang said.

Total sales from the mobile division leapt 109 percent to $3.39 billion, or a quarter of the company's sales.

Lenovo said net profit was $253 million, down from $265 million a year prior due to ballooning expenses associated with closing two major acquisitions. The Beijing-based company also acquired IBM's low-end server unit for $2.1 billion.

The results beat expectations of $13.71 billion in revenue and $200 million in net profit, according to analysts polled by Thomson Reuters SmartEstimates.

Lenovo continued to consolidate its hold on the PC market, reaching a record 20 percent share during the quarter with sales of $9.15 billion. Shipments rose 5 percent compared with a 3 percent decline in the broader industry, with growth particularly strong in Eastern Europe.

(Reporting by Gerry Shih; Editing by Stephen Coates)