Computer maker posts strong growth in quarterly revenue
Lenovo Group Ltd said on Thursday that it will spend about $224 million to acquire a 51 percent stake in Japanese technology firm Fujitsu Ltd's personal computer business, to boost margins and recapture the top slot in global personal computer shipments.
The Chinese company, which was dislodged from the top slot earlier this year by HP Inc, expects the Fujitsu deal to have a scale-effect on its operations and revenue.
The combined market share of Lenovo (21.6 percent) and Fujitsu (about 4 percent) is bigger than HP which holds about 22.8 percent, according to data from market research company International Data Corp.
The deal also came close on the heels of the company announcing its strongest revenue jump in two years, thanks in part to the faster-than-average growth of its PC business.
Hong Kong-listed Lenovo said in a filing that it would pay for the stake in Fujitsu Client Computing Ltd with 17.85 billion yen ($156.70 million) in cash and the remaining based on performance to 2020. The two sides will also set up a joint venture that will integrate Fujitsu's client resources, manufacturing, research and development capabilities with Lenovo's global presence.
Lenovo said it posted a 5 percent year-on-year jump in revenue to $11.8 billion for the quarter that ended in September. The performance surpassed analysts' projections for $11.3 billion and marked the biggest rise since the same period of 2015, according to data compiled by Bloomberg.
Yang Yuanqing, chairman of Lenovo, said in a statement that "While sustaining a leading profit level, our PC business has performed better than the average. By boosting marketing and sales capabilities, the data center business is also being effectively reconstructed."
Lenovo has been struggling to revive momentum in personal computers, smartphones and server businesses amid mounting competition from both domestic peers and foreign rivals.
Jacky Zhao, an analyst at IDC, said the Fujitsu deal will contribute to Lenovo's long-term development, as it is trying to team up with all possible partners amid the continued downtrend in the PC market.
"Setting up joint ventures is an effective way to survive the cold winter. It can give Lenovo more resources to revive its business when demand begins to pick up," Zhao said, adding the commercial and consumer PC market is already showing signs of recovery.
Lenovo also said in July, 2016, that it would spend $195 million to increase its stake in its PC joint venture with another Japanese firm NEC Corp.
When it comes to the smartphone business, where Lenovo is facing mounting pressure from rivals such as Huawei Technologies Co Ltd, the company said the turnaround is still in progress.
In the quarter ended in September, it sold 15.3 million units of smartphones globally, up 10 percent year-on-year, with good performances especially in Latin America and Western Europe.
