Lenovo looking for merger and acquisition as shortage of LePad tablet mounts pressure.

Lenovo, the world's No 4 PC brand looking for merger and acquisitions as company facing supply shortages for its LePad tablet , that was launched in China. As such company's quarterly earnings surged three-fold  and beat analysts' expectations.

"We'll look at opportunities that expand our capabilities in ... combining PC technology and the mobile internet technology,"  Chief Operating Officer Rory Read said.

PC companies have been aggressively looking to mobile devices and IT services to diversify out of personal computers, for which net margins can fall to low single digits.

Apple's iPad has worsened things for brands such as Lenovo and Taiwan's Acer, cannibalizing the low-cost netbook PC segment that had proven immensely successful with consumers during the global financial crisis.

"Lenovo still has a long way to go with tablet PCs," said Vincent Chen, an analyst with Yuanta Securities in Taipei. "They are only in China now, and there may be pricing pressure as more brands push out their own tablet PCs this year."

Acer this week launched its Iconia tablet PC running on Google's Android operating system , with a retail price of $449.99, lower than similar products from rivals such as LG Electronics and Research in Motion.


"Price pressure will definitely rise as the year goes on, and the challenge right now for Lenovo and other PC brands is how they maintain margins in the tablet PC segment," said Chen.

Chief Executive Yang Yuanqing declined to disclose exact shipment figures for the LePad.

"We're pretty confident of taking up more than 20 percent market share with LePad," Chairman Liu Chuanzhi said.

Lenovo more than tripled its fourth-quarter net profit, beating forecasts on robust demand from commercial customers and making up for a slowdown in the consumer sector.

It reported net profit of $42.13 million in the January-March quarter, up from $12.8 million a year earlier, according to Reuters' calculations based on full-year results.

This was better than expectations for $36.7 million in a survey of 23 analysts polled by Thomson Reuters I/B/E/S.

"Momentum in commercial PC demand has gradually picked up, benefiting from the corporate refresh cycle, while consumer PC demand weakened due to a worsening macroeconomic environment and increasing competition from tablet products," the company said in a statement to the Hong Kong stock exchange.

For the fiscal year to end-March, Lenovo's net profit was $273.2 million, beating a consensus forecast for $267.8 million.

Last week rival Dell delivered stellar quarterly results while Hewlett-Packard disappointed markets by slashing its 2011 earnings forecasts.

China continued to be the star performer, accounting for 46.4 percent of Lenovo's sales.

However, operating margins fell 0.5 percentage points to 5.1 percent due to higher marketing costs from the LePhone and LePad mobile products, the company said.

Feature phone shipments grew 40 percent from the preceding year, Lenovo said, helping it grow market share to 4.7 percent in China.

Lenovo shares fell 11 percent in January-March, lagging a 2.1 percent gain in the benchmark Hang Seng Index.

On Thursday, Lenovo's shares were up 0.7 percent before the results were announced, in line with the Hang Seng.
( Source: Reuters )
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