Lenovo misses forecasts on IBM and Motorola deals

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By Larry Banks

Lenovo Group Ltd, which is the biggest PC maker in the world in terms of unit sales, said today that its annual net profits rose just one percent to $829 million, slightly lower than analyst expectations, mainly because it completed two major acquisitions in the past year.

Lenovo purchases weigh on profits

The Beijing-based company closed it’s $2.1 billion acquisition of IBMs server unit in October, and also its purchase of Motorola for $2.9 billion, adding to the lower profits for the year that ended on March 31st.

Analysts however had forecast a net profit slightly higher at $857 million. Lenovo’s revenue in the 2014/2015 financial year rose 20% to $46.3 billion as the company expanded its share of the shrinking PC market to a fifth. In Q4, revenue rose 21% to $11.3 billion.

Lenovo noted that PC sales rose across all regions but highlighted Europe as an area of potential future growth. PC sales to businesses on the other hand rose 3% year-on-year, even thought there was a 3% drop in the wider market, the company said.

Lenovo PC

Lenovo has been expanding aggressively into enterprise-level computing, and smartphones, to offset the global decline in PC sales.

The firm said that both the IBM and Motorola units were on track to deliver the targets, but did not provide further details. Chief executive Yang Yuanqing previously said he would return the business units to profit by 2016.

After beating the earnings expectation in previous consecutive quarters, Lenovo shares have risen almost 50% to HK $13.6 in the past 12 months, once again outpacing the 23% gain in the broader market.

SOURCE: Reuters.

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