Lenovo Reports Global Profitability in First Fiscal Quarter

Lenovo Reports Global Profitability in First Fiscal Quarter

Lenovo results for the first fiscal quarter ended June 30, 2005 showed strong organic growth, outpacing the industry in key emerging markets, as well as growth from the acquisition of the former Personal Computing Division of IBM.

Lenovo’s consolidated turnover increased 234 percent (year-to-year) to HK$19.6 billion. Pre-tax profit increased 54 percent to HK$515 million and profit attributable to shareholders was HK$357 million, an increase of 6 percent compared to the prior year’s comparable period. Basic earnings per share decreased 8 percent, to 4.12 Hong Kong cents, reflecting dilution related to the acquisition of the former IBM PC Division. Lenovo Group Limited (HKSE:992; ADR: LNVGY) results include two months of contributions from the acquisition, which was completed on April 30, 2005.

Lenovo’s PC operations in China, the Americas and Europe and its mobile handset business were profitable; Asia Pacific PC operations (excluding Greater China) showed a small loss. The Group reported HK$18.3 billion in turnover in its global PC business. Lenovo’s PC shipments were up 7 percent year-to-year and 14 percent quarter-to-quarter, the highest comparable quarter of PC shipments on record, based on industry reports.

“We are very pleased with new Lenovo Q1 performance. In our China PC business, we achieved rapid growth as a result of the business transformation initiated last year. Our mobile handset unit delivered strong and profitable growth, and, more importantly, the acquired PC business was profitable worldwide. Our results validate the expectations we had when we acquired the business and also reinforce our conviction that we have a model for ongoing profitability.” said Yuanqing Yang, chairman of Lenovo. “I am optimistic about Lenovo’s future as we move forward with important growth initiatives, such as transplanting our successful PC business template in China into other emerging markets.”