Lenovo (HKEx: 992), arguably China’s best known consumer brand, has just released its latest quarterly results that show strong growth but lack any real excitement, as new acquisitions contribute to its top line for the first time. (company announcement) My real concern in all this is that the company could well be in a honeymoon period at this point, enjoying the immediate gains of higher revenue and profits from 2 big acquisitions last year, even as those same 2 acquisitions in the difficult Japanese and German markets are sure to start causing problems soon. On the surface at least, the results look quite solid. Revenue for the latest fiscal quarter rose 44 percent to $8.37 billion, while profit rose an even stronger 54 percent to $153 million, as the company gained sales from its new joint venture with Japan’s NEC (Tokyo: 6701) and its acquisition of Germany’s Medion. Investors didn’t seem too excited by the results, bidding up Lenovo shares slightly in morning trade in Hong Kong after the figures came out. The lack of excitement owes to the fact that Lenovo hasn’t been particularly aggressive in smartphones or tablet PCs, 2 of the big growth areas it will need to develop if it wants to remain a relevant PC leader for the years ahead. It did take an interesting move on that front last month, when it announced it would be one of the first backers for a new smartphone chip being developed by Intel (Nasdaq: INTC), the global giant better known for its PC-based chips. (previous post) Still, new models using the chip are probably still at least several months away, and will undoubtedly have many minor problems before they become a major contributor, if ever. Meantime, Lenovo has quite a few potential clouds hanging over its head that could turn into real trouble for the company. One of the latest of those emerged over the past week, when rival Acer (Taipei: 2353) filed a suit against one of its former top executives, Gianfranco Lanci, who recently moved to Lenovo to head its European operations. (Chinese article) But more worrisome in my view are the potential for problems with both the NEC and Medion acquisitions. Lenovo said last year it was considering moving some production to Japan, in a move clearly aimed at placating NEC’s Japanese customers worried about receiving inferior product after the deal. Meantime, the company will also probably be forced to maintain some production in German after buying Medion. Both of these labor markets are famously difficult even for the most experienced companies, and Lenovo could soon discover it has taken on a bigger challenge in both than it originally thought. On the whole, I would say to look for 1 and perhaps even 2 more quarters of positive results before the new reality starts to take effect and Lenovo enters its next period of crisis, probably by the end of the year.
Bottom line: Lenovo’s latest results show the company is still enjoying a honeymoon period from 2 recent acquisitions, but those same purchases will lead to new troubles by the end of this year.
Related postings 相关文章:
◙ Lenovo: Finally a Risk Taker In Intel Tie-Up 联想联手英特尔,终於肯冒险
◙ Lenovo Starts Year With New Europe Chief, TV Tie-Up 联想新年新气象：聘用新高管并推互联网电视
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There’s interesting news that Lenovo (HKEx: 992) the world’s second largest PC maker, may move some of its production to Japan — a step that at first glance seems to totally contradict global trends that have seen PC makers relocate nearly all their manufacturing to developing markets like China and Vietnam in recent years. (
Apple (Nasdaq: AAPL) may be able to bully big names like Samsung (Seoul: 005930) by suing them in Western courtrooms over intellectual property (IP) infringement claims, but it may find the tactic more difficult to pursue in China, where it has just lost a major trademark lawsuit to a much smaller Taiwanese player. According to domestic media reports, a court in the southern boomtown of Shenzhen has ruled against Apple, the world’s biggest tech company, in a lawsuit it brought against Proview (HKEx: 334) claiming infringement of its iPad trademark. (
