World's No.4 PC maker Lenovo Q1 net up, margins slip

By Judy Hua

HONG KONG (Reuters) - Lenovo Group, the world's fourth-largest PC maker, posted a 65 percent rise in quarterly earnings, the slowest growth in a year, as it copes with a U.S. slowdown and weaker Chinese demand after a devastating earthquake.

China's largest maker of personal computers posted a net profit of $110.49 million from April to June, up from $66.84 million a year ago, and just ahead of the average forecast of $107.47 million from four analysts polled by Reuters.

Shares in Lenovo fell 2.6 percent on Thursday ahead of the results announcement, lagging a 0.7 percent rise in the benchmark Hang Seng Index.

Lenovo's falling margins in the face of keen competition has concerned analysts, but they say Lenovo, which competes with Hewlett-Packard, Dell Inc and Asian rival Acer, should fare better over the long run because of its commanding market share in China and in emerging markets.

Operating profit margin in China -- it commands a third of the world's top PC market after the United States -- fell to 6.8 percent in April-June period from 7.3 percent a year earlier. Its operating profit margin in the Americas fell dramatically to 0.3 percent from 3.4 percent.

Deepak Advani, Lenovo chief marketing officer, told Reuters that it was difficult to judge the economic landscape in the U.S., but that Lenovo would continue to invest in R&D.

"The drop was largely due to due to increased competition and promotional activities for the Olympic Games. We expect the margin to remain stable at this level in the current year," Chief Finance Officer Wong Wai Ming told reporters.

For the results statement please read here  Continued...