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November 4, 2009

Lenovo Q2 sales down 5% to $4.1 billion

Notebook shipments worldwide grew 37% on year ago quarter

By CBR Staff Writer

Lenovo has reported consolidated sales of $4.1 billion for the second fiscal quarter of 2009, a decrease of 5% compared to the same period last quarter, but increased 19% sequentially.

The company’s worldwide PC shipments grew 17%, compared to the same period last year. Comparatively, industry PC shipments increased 2.3% worldwide for the same period.

The company’s gross profit for the second quarter decreased 24%, compared to the second quarter of 2008 and increased by 14% sequentially. Operating profit was $43m, excluding restructuring costs/one-off items, an increase compared to operating profit of $16m for the first quarter of 2008.

During the quarter, Lenovo continued its previously announced worldwide restructuring program, designed to make the company more cost competitive and operationally efficient. As a result of the restructuring, Lenovo expects to save approximately $300m on an annual run-rate basis. The company incurred a restructuring cost of $3m for the second quarter.

Geographically, Lenovo China posted consolidated sales of $2 billion for the second quarter, an increase of 9% compared to the same period last year. In emerging markets, the company posted consolidated sales of $618m while mature markets accounted for $1.5 billion.

Profit attributable to equity holders for the quarter was $53m, an increase of more than double compared to the company’s first fiscal quarter loss attributable to equity holders of $16m.

Lenovo’s notebook continued to be the largest contributor to the company’s sales worldwide, generating 63% of total sales revenue. The company’s notebook shipments worldwide in the second fiscal quarter were up 37% year-over-year, compared to an industry increase of 16%. Consolidated sales of desktop computers worldwide decreased 13% year-over-year to $1.5 billion. Desktop shipments declined 2%.

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Liu Chuanzhi, chairman of Lenovo, said: “Lenovo’s second quarter results showed that the company has the right strategy in place and is executing on that strategy. Our results are moving in the right direction and we are particularly pleased with our performance in China and in the transactional business model.

“We are starting to see positive signs that the worldwide economy is improving, and we will continue to focus on our long-term goal of growing our business profitably worldwide. The strategy we have set in motion will continue to help us produce the appropriate results, as long as we keep executing as we are capable, and carefully managing our costs.”

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