Lenovo’s reported 2Q12 earnings of US$144mn, up 32% qoq or 88% yoy, beating market consensus due mainly to stronger sales and lower taxes expense. GPM dipped mildly to 12.2% from 12.5% in 1Q12 due to low margin of NEC JV and Medion. However, OPM of 2.13% was up a bit from 1Q12’s 2.08% on lower OPEX.
Increasing market share gains. Lenovo’s total PC shipments grew 26% YTD outpacing the industry growth rate. Market share in Emerging Market (excl. China) increased to 8% from 6.9% qoq. Russia and India both reached double digits market share. Lenovo now become #1 commercial NB vendor globally, #2 in DT PC market and # 3 in consumer PC market. Though the EM segment remained losses, OPM improved qoq. Lenovo’s strategy is to gain shares first and believe higher share will drive profitability.
HDD price hike risk. Lenovo has seen a HDD price hikes as Thailand floods limited the HDD supply. Mgmt stated that the company would try to reduce costs from other components and change strategy to become less volume driven.