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Lenovo's third-quarter beat, confidence on managing virus impact boost shares

By Brenda Goh
Illustration photo of a Lenovo logo

By Brenda Goh

SHANGHAI (Reuters) - Lenovo Group <0992.HK>, the world's biggest PC maker, posted a better than expected profit on Thursday and said its global operations would help it tackle short-term headwinds from China's coronavirus outbreak, sending its shares up nearly 8%.

The Chinese company reported an 11% rise in net profit for the quarter ended December to $258 million thanks to strong demand for its PCs and smart devices, beating an average $223 million estimate of seven analysts, according to Refinitiv data. Revenue rose to a record $14.1 billion.

"The numbers are very good," said Christopher Yim, analyst at BOCOM International, adding that the PC business' profitability was impressive.

Lenovo is among companies facing disruptions to their supply chain after local governments in China extended a Lunar New Year holiday and imposed strict travel curbs to limit the spread of the coronavirus.

IPhone maker Apple <AAPL.O> warned earlier this week it will not be able to meet sales forecasts for the current quarter as the virus outbreak was pressuring its supply chain.

One of Lenovo's biggest factories is in the central Chinese city of Wuhan, the epicentre of the outbreak, where businesses remain shut, although its factories in the cities of Shenzhen and Hefei resumed work on Feb. 10.

"The vast majority of the group's factories in China have reopened and are operational on a limited basis, although its suppliers and even logistics services across the countries remained impacted," Lenovo said in a statement.

"Nevertheless, given its extensive global footprint, the company is well positioned to address the supply challenges by leveraging its strength as a global company with worldwide manufacturing capabilities and supply chain efficiency."

Yim of BOCOM International said Lenovo was better placed than some of its technology peers because of spread out manufacturing facilities.

"They have a global manufacturing base, so that could put them in a relatively better position."

The global PC market grew 2.3% in the quarter to December, as customers replaced machines to migrate to Windows 10, market research firm Gartner said last month. Lenovo took a 24.8% market share during the quarter, ahead of rivals HP Inc <HPQ.N> and Dell, it said.

The year began on a positive note for Lenovo, which won a respite in the U.S.-China trade war after an early January interim agreement between Washington and Beijing eased 18 months of tensions.

Laptop computers were among $156 billion worth of Chinese goods that Washington had threatened to hit with tariffs in December, along with cellphones and toys, which U.S. President Donald Trump later decided not to implement.


(Reporting by Brenda Goh; Editing by Muralikumar Anantharaman)