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Lenovo favours European smartphone battle over home grown fight

Lenovo wants to kickstart its overseas expansion efforts after posting a 23 per cent rise in profit during a first quarter when it became China’s largest smartphone vendor.

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The firm’s net income reached $214 million [£128 million] in the three months to June, an increase from $174 million [£104 million] the year before and ahead of an average analyst figure of $202 million [£121 million] as predicted by a Thomson Reuters SmartEstimate poll.

After realising that Chinese consumers really like its smartphone offering, the company is hoping that by expanding overseas it can replicate its success and become a big player in the market that is currently a small part of its balance sheet.

Lenovo reported a 39 per cent rise in its worldwide shipments during Q1 FY2015 and company CEO Yank Yuanqing indicated that it wants to target profitable markets overseas instead of battle it out with “unhealthy” rivals in China.

"There are local players who only chase growth so they can attract investors in the capital markets, which is not a healthy model," Yang said in a telephone interview with Reuters. "We don't do business that way. We will balance growth and profitability. China is still one of the most important markets for Lenovo, but actually we have more potential opportunity outside of China.”

Lenovo has seen its sales rise by 300 per cent in Southeast Asia and 500 per cent in Eastern Europe with its overall revenue for the quarter rising by 18 per cent to $10.4 billion [£6.23 billion], and a significant chunk of this gain coming in Europe.

It is also hoping to finally get US regulatory approval on its deal to buy Motorola Mobility from Google for $2.9 billion [£1.74 billion] and Yang thinks it can return the brand to profitability within four to six quarters or “maybe earlier”.

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The firm’s core PC business, which accounts for 82 per cent of its sales, has continued to maintain a stranglehold on that market with laptop sales up 12 per cent despite a wider market drop of 3.7 per cent globally. Its PC market numbers will eventually start to tail off and by then it will hope to have made significant gains in key European smartphone markets.