Lenovo 0992

[winston]

UPDATE 1-Top China PC maker Lenovo's Q2 plunges 78 pct
By Joseph Chaney

HONG KONG, Nov 7 (Reuters) - China's Lenovo Group Ltd , the world' No. 4 PC maker, posted a 78 percent plunge in quarterly earnings on slower shipments and lower margins, as the global financial crisis crimps appetite for technology products.

But analysts say China's top computer maker, which competes with Hewlett-Packard, Dell Inc. and Asian rival Acer, is expected to thrive in the long run due to its commanding share of China's market -- the world's top PC arena after the United States -- and other emerging markets.

Last month, market researcher IDC said personal computer shipments in Asia excluding Japan grew 12 percent to 20.2 million units in the third quarter -- a figure that fell 2 percent short of its forecast for the region.

Corporate-focused Lenovo earned a net profit of $23.44 million in its fiscal quarter ended in September, compared with $105.26 million a year earlier.

The result severely lagged an average forecast for $91.80 million, according to five analysts polled by Reuters Estimates.

Lenovo derived $1.9 billion -- of $4.3 billion in sales -- from greater China during the quarter, and $700.8 million from the Americas.

For a full statement, please click on http://www.hkexnews.hk/listedco /listconews/sehk/20081107/LTN20081107099.pdf

Shares in Lenovo plunged 36 percent between July and September, underperforming the 18.5 percent loss on Hong Kong's benchmark Hang Seng Index over that period, as investor's fled equities in the wake of the financial turmoil.

The stock had lost nearly 2.8 percent ahead of the earnings announcement on Friday.

Last month, Acer, the world's No. 3 PC vendor, said its third-quarter net profit rose 4 percent to T$3.04 billion, lagging analyst estimates for T$3.16 billion.



US WEAKNESS

The United States has been Lenovo's second-largest revenue contributor since it bought IBM's PC unit for $1.25 billion in 2005.

But its performance in the Americas, where it was barely profitable in the first quarter, was hit by sluggish consumer appetite.

"Slowing commercial demand and aggressive pricing impacted the group's profitability in the geography," Lenovo said in a statement.

Armed with a solid balance sheet, Lenovo has said it is considering acquisitions after Acer beat it in a race to buy Europe's Packard Bell last year.

In the past two months, sources at Japan's Fujitsu Ltd said it was in talks with Lenovo aimed at selling to the latter Fujitsu-Siemens's personal computer division but keeping the server business.

Two sources have said that talks are still going on with Lenovo, with key issues centred on personnel cuts and negotiations with Fujitsu Siemens Computers' labour union.

But some analysts say a deal could hurt Lenovo if there is an additional downturn in global tech appetite.

"As we have been cautious on Lenovo's outsized exposure to the corporate PC market, we believe a new major M&A would increase the downside risk for Lenovo," Goldman Sachs said in an earnings preview note.

[millionairemind]

Lenovo's Amelio Says Company Faces Challenge as Demand Falls

By Mark Lee

Nov. 7 (Bloomberg) -- Lenovo Group Ltd., China biggest computer maker, said slowing demand from corporate customers poses an ``unprecedented challenge,'' after the company posted profit that was a third of analysts' estimates.

Lenovo shares slumped as much as 20 percent in Hong Kong trading after Chief Executive Officer William Amelio said a ``dramatic'' slowdown in sales to companies will persist for several more quarters. Net income at the Raleigh, North Carolina-based company fell 78 percent to $23.4 million in the second quarter.

Demand from U.S. clients slipped as slowing corporate and retail spending amid financial market turmoil pushed the world's biggest economy to the brink of recession. Lenovo, the maker of Thinkpad laptops, lost market share in Asia and Europe as bigger rivals Hewlett-Packard Co., Dell Inc. and Acer Inc. added lower- cost products and stepped up discounts.

``Profitability has come down quite markedly as Lenovo is forced to cut prices in response to the fierce competition,'' said Frank He, who rates Lenovo shares ``market perform'' at BOC International (Holdings) Ltd. in Hong Kong. ``The company will continue to be under pressure from Hewlett-Packard and Dell.''

Revenue excluding the effects of currency fluctuations fell 5 percent, Chief Financial Officer Wong Wai Ming said in the conference call today.

Lenovo plunged 11 percent to HK$2.25, the lowest since June 14, 2006, as of 2:40 p.m. in Hong Kong trading. The stock has declined 68 percent this year, compared with a 50 percent drop in the city's benchmark Hang Seng Index and a 21 percent decrease in Acer's shares.

Gross Margin

Gross profit margin, or the percentage of sales left after deducting production costs, narrowed to 12.6 percent, from 15 percent a year earlier, Lenovo, China's biggest personal- computer maker, said.

Lenovo, which moved its headquarters to the U.S. after buying International Business Machines Corp.'s PC unit in 2005, said second-quarter sales in the Americas region, its biggest market outside China, fell 9.4 percent to $1.07 billion. Shipments in the U.S. market declined 9 percent, Wong said.

``They have a big exposure to the U.S. corporate PC market,'' Charles Guo, who rates Lenovo shares ``neutral'' at JPMorgan Chase & Co. in Hong Kong, said before the announcement. ``The company has been slow in getting into the consumer market.''

Global Shipments

Lenovo's share of global PC shipments fell to 7.4 percent in the three months to September, from 7.9 percent in the previous quarter, according to research company IDC.

Acer, which overtook Lenovo as the third-biggest PC maker after acquiring Gateway Inc. and Packard-Bell BV, increased its market share to 12.5 percent, from 9.3 percent a year earlier, IDC said. The Taiwan company gained sales after introducing so- called netbook laptops aimed at tapping demand for smaller computers, according to the Framingham, Massachusetts-based researcher.

Lenovo started selling netbook laptops last month as part of plans to expand its product offering for consumers. Hewlett- Packard, the biggest PC maker, offered the products from April, while second-placed Dell followed in September.

Revenue in China, Taiwan and Hong Kong rose 11 percent to $1.9 billion, Lenovo said. Sales in Europe, Middle East and Africa increased 0.6 percent to $890 million.

Cisco Systems Inc., the world's biggest maker of networking equipment, this week forecast a 10 percent drop in quarterly sales, underscoring concerns that companies will pull back technology spending amid the financial crisis.

Dell, based in Round Rock, Texas, said in August that weakening technology spending in the U.S. may have spread to Europe and Asia.

[iam802]

let's hope they don't sacrifice the 'Thinkpad' quality.

[winston]

Morgan Stanley cut Lenovo's 2009 and 2010 earnings estimates by 41 an 19 percent, respectively, to factor in greater margin erosion and restructuring costs to come, and cut its target price to HK$1.8 from HK$2.6.

[millionairemind]

Lenovo warns of loss in third quarter, shares tumble
Computer maker to layoff 11% of global workforce amid 'significant' slowdown
By Chris Oliver, MarketWatch
Last update: 10:23 p.m. EST Jan. 7, 2009

HONG KONG (MarketWatch) -- Shares of Lenovo Group plunged as much as 18% in Hong Kong trading Thursday after the maker of ThinkPad computers said it expects to post a "material loss" for the three months ended Dec. 31 and plans to layoff 11% of its global workforce, or about 2,500 workers, because of a sharp drop in consumer demand.

Lenovo said in a statement to the Hong Kong Stock Exchange its loss in the third quarter was "mainly due to the unprecedented global economic challenges facing the world resulting in a reducing demand of personal computer and related products."
The firm did not give a figure for the loss during the quarter but said revenue and gross profit decreased "significantly" from a year earlier. It noted that business users, which make up a high proportion of its sales, had been hard hit during the downturn, while a sharp slowing in China, which also accounts for a significant portion of its business, had also been a factor.

The Beijing-based computer maker said it would merge operations in China, Russia and the Asia-Pacific and also relocate its call center operations from Toronto, Ontario, Canada to Morrisville, N.C.. It will also reduce executive pay and long-term performance incentives as well as cut performance bonuses for the coming year.

[winston]

DJ MARKET TALK: HSBC Cuts Lenovo To Underweight From Neutral

1231 [Dow Jones] STOCK CALL: HSBC downgrades Lenovo (0992.HK) to Underweight from Neutral after company announced higher-than-expected restructuring cost Thursday. Says, US$150 million restructuring charge for fiscal 3Q09 ended Dec. 31 tops company's guidance, given in 2Q09, for charge of about US$100 million, leading to losses for both fiscal 3Q09, 4Q09. Adds, fiscal 4Q09 PC sector visibility still low.

Expects, 4Q09 top line to drop more than 20% on-quarter. Cuts FY09-10 earnings forecasts 59%, 28% on macro uncertainty; cuts target HK$1.30 from HK$1.81, based on 8.5X 2008 P/E. "Fundamentals to deteriorate further. Intel's guidance cut symbolizes not only the gloomy PC outlook, but also the change in business environment (netbooks dominate growth).

[winston]

Lenovo fell 0.18 hkd or 9.42 pct to 1.73, extending its 26 pct slump yesterday after announcing that it is likely to post a loss for the December quarter and that it will cut 2,500 jobs or about 11 pct of its global workforce.

Several brokers cut target prices and revised their earnings estimates following the company's announcement.

JP Morgan cut its earnings estimates for Lenovo and said it now expects the personal-computer maker to report a loss for the year to March 2009 and very little profit in the next fiscal year.

The brokerage expects Lenovo to report a net loss of 69 mln usd for the year to March 2009, against a previous estimate for a profit 183 mln usd. The profit forecast for the next fiscal was cut to 46 mln usd from 157 mln.

Goldman Sachs said it is trimming its target price to 1.80 hkd from 1.90, while Morgan Stanley cut its target to 1.40 hkd from 1.80.

[winston]

DJ MARKET TALK: Daiwa Cuts Lenovo Target To HK$1.42 From HK$1.65

0945 [Dow Jones] STOCK CALL: Daiwa cuts Lenovo's (0992.HK) target to HK$1.42 from HK$1.65 based on net-cash-per-share estimate of HK$1.26 as of March 31, PER of 2X on FY10 operating-EPS forecast of US$1.0 cent. Keeps Underperform.

Notes Gartner reported Lenovo's share of the PC market globally slid to 7.1% for 4Q08 vs 7.5% year-earlier, due to weak netbook shipments, weak demand from corporate-centred PC business in overseas markets.

"We think it is too early to turn bullish on the counter, given the lack of near-term demand upside from Lenovo's corporate-centric businesses in the overseas markets, which accounted for 56% of its total revenue for 2Q FY09." At pre-open, stock +0.6% at HK$1.56.

[winston]

DJ MARKET TALK: Lenovo's 3Q Net Loss Tipped At US$58M -Poll

1344 [Dow Jones] PREVIEW: Lenovo Group (0992.HK) likely to post net loss of US$58 million for fiscal 3Q ended Dec. 31 vs FY3Q net profit of US$171.7 million year earlier, according to five analysts polled by Dow Jones Newswires. Results due Thursday during lunch break.

Lenovo said last month it expected to post material 3Q loss on lower global PC demand; plans to cut 11% of total workforce as part of cost-cutting measures. "Slowing global consumer demand will continue to weigh on Lenovo's results in the coming quarters.

We don't expect Lenovo to turn around in the first half of 2009," says BOCI analyst Frank He; rates Lenovo Sell with target HK$1.25. Stock +2.7% at HK$1.54; HSI up 2.5%.

[winston]

DJ MARKET TALK: CLSA Cuts Lenovo Target To HK$1.06 From HK$1.90

1336 [Dow Jones] STOCK CALL: CLSA cuts Lenovo (0992.HK) target price to HK$1.06 from HK$1.90 after lowering earnings estimates FY09-10 net losses of US$235 million, US$112 million vs previous net profit estimates at US$157 million, US$108 million. Keeps Sell. Says, Lenovo is seeing deteriorating market share in U.S., Western Europe, with net losses likely to accelerate this fiscal year as continued pricing pressure depresses gross margins, with improvement next fiscal year on cost-cutting measures, improving economy.

"While Lenovo's long-term sustainability remains intact, regaining profitability will be painful given the poor macroeconomic environment. Sustainable market share losses may also risk an impairment charge on Lenovo's sizable goodwill." Stock +2.7% at HK$1.54; HSI up 2.5%.