HONG KONG, January 26, 2006 – Lenovo’s consolidated revenue for the third fiscal quarter ended December 31, 2005, increased 392 percent year over year to HK$31.1 billion, driven by particularly strong performance in China and the May 2005 acquisition of IBM’s PCD business. Lenovo’s PC shipments grew 12 percent year over year.
In the same period, pre-tax income grew 46 percent to HK$498 million, while profit attributable to shareholders rose 12 percent to HK$365 million. Basic earnings per share for the third quarter 2005/06 totaled 4.12 Hong Kong cents versus 4.37 Hong Kong cents in the third quarter of 2004/05. Operating cash flow continued to be strong, and net cash reserves as of December 31, 2005, totaled HK$9.6 billion.
“The acquired business has now been profitable for three consecutive quarters, in line with the Board’s expectations, although regional performance has varied,” said Yang Yuanqing, Lenovo’s chairman. “Now we must meet even higher expectations. We believe our proven business model, an enhanced product portfolio, and a heightened focus on operational efficiency will enable us to optimize profitability across the globe. We are moving quickly to address these issues and to take advantage of the strong demand that exists for our products.”
William Amelio, who joined Lenovo in December as president and chief executive officer, said, “Around the world, the Lenovo and Think brands stand for the highest standards of innovation, performance, and service. Excellent progress in recognizing the potential of this company has been made, but our path going forward is very clear.
“We must first keep a laser sharp focus on our cost and expense structure to continue to drive operating efficiency. Second, we must drive product competitiveness with innovative, high quality, appropriately priced products that address key growth areas. Third, we must leverage our success in China and the success of the dual transaction/relationship model in support of our products. I’m looking forward to building on the strong momentum Lenovo has delivered to date.”
PRODUCT OVERVIEW Lenovo’s PC business showed strong growth in China where the Company has the #1 brands with both Lenovo and Think. For the second quarter in a row, Lenovo’s ThinkPad was ranked #1 in customer satisfaction by third-party sources, indicating the highest levels of quality, innovation and reliability.
In order to take full advantage of the opportunity in key growth areas without margin pressure, Lenovo is pursuing a broader PC product line that can competitively address key growth areas and strengthening its transaction model and supply chain in support of these products. Last quarter, the Company introduced products for several new segments, including the fast-growing SMB market and China’s consumer/small office customers, which are expected to improve its longer-term performance.
About Lenovo Group Ltd. Lenovo (HKSE: 992) (ADR: LNVGY) is dedicated to building the world’s most innovative personal computers. Lenovo’s business model is built on innovation, operational efficiency and customer satisfaction as well as a focus on investment in emerging markets. Formed by Lenovo Group’s acquisition of the former IBM Personal Computing Division, the company develops, manufactures and markets reliable high-quality, secure, and easy-to-use technology products and services worldwide. Lenovo has major research centers in Yamato, Japan; Beijing, Shanghai and Shenzhen, China; and Raleigh, North Carolina. For more information, see www.lenovo.com .
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