Lenovo Is the Cheapest Name in Tech
Granted, being the leader in a dying PC industry doesn't provide much cachet on the Street. But Lenovo's numbers suggests that PCs aren't dying at all -- at least not in China. What's more, the company is in the midst of diversifying away from that business, and its recent fourth-quarter results suggest Lenovo is poised to deliver more gains.
As PC rivals Dell (DELL) and Hewlett-Packard (HPQ) are struggling to hold market share, the Chinese computer giant continues its impressive run after posting record fourth-quarter earnings of $205 million, up 34% from a year before. Revenue rose 12% year over year to $9.36 billion.
Earnings per share were $1.99, or $1.96 on a diluted basis.
What's more, the company was able to post a profit for the first time in its smartphone division.
That means it's gaining traction in that business, even though it's not an immediate threat to Apple (AAPL) or Samsung.
The company reported that continues to outgrow the broader market, particularly in Europe, the Middle East and Africa, where it outgrew the market by 36 points. In EMEA, Lenovo has amassed a record 11.1% market share.
Lenovo is doing this while strengthening its lead in China, where it currently holds a 36.7% share of market. This means that if PCs are indeed dying, nobody took the time to explain this to Lenovo.
That close to 90% of the company's business comes from PCs is remarkable, especially in the current climate, where the death of PCs is being screamed everywhere.
The travails of the PC industry are often used as a bear argument against Lenovo. This is understandable.
For instance, even though Lenovo is the brand of choice for one out of every three PCs sold in China, a market with a population of more than 1 billion people, the profit is not as attractive relative to the volume sold. The issue is that PCs are a low-margin business.
But, as I noted, Lenovo understands that it needs to diversify. To that end, mobile devices are becoming an increasingly important part of the company's strategy. And it's beginning to show in the numbers. For instance, in this quarter, mobile devices contributed to 11% of overall revenue.
While this is not a breathtaking change, it is still progress. Besides, it's not as if Lenovo is struggling to hold PC market share. Meanwhile, Lenovo is rumored to be weighing a bid for Research In Motion (RIMM) , and the company said it would consider RIM among other options, according to Bloomberg.
It's a move that makes too much sense to not happen, and it's something I discussed at TheStreet last year, long before these rumors surfaced. In that article, I wrote the following:
Lenovo deserves more love than it gets from investors. While the company is operating on all cylinders, it is still a relatively unknown. But I think with its tablet and smartphone objectives this is all about to change. It is not out of the realm of possibility that Lenovo might consider making a play for a company such as Research In Motion . I can't think of a better way for it to make a splash on the market while also announcing its presence in the U.S. in the most authoritative way.