Lenovo falls amid banking optimism
Updated: 2014-10-14 07:16
By Celia Chen in Hong Kong(HK Edition)
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Customers reading a leaflet at a Lenovo shop. Despite Lenovo's performance in grabbing one-fifth of the global personal-computer market and winning a cheaper acquisition of an IBM server unit, Lenovo's share price has declined as investors lose confidence in the worldwide PC market. AFP |
PC giant faces fierce competition despite market share gains
Lenovo - the world's biggest personal-computer (PC) manufacturer - suffered a successive four-day fall in its share price in Hong Kong amid an almost 2-percent shrink in personal-computer shipments worldwide in the third quarter of this year compared with a year ago.
The share price of the Beijing-based multi-national computer technology giant plunged by about 10 percent on Monday to HK$10.92 ($1.4) - the biggest drag on the Hang Seng Index.
But, key investment banks have played down the slide and come to the company's defense, pointing to Lenovo's solid core business development. "Lenovo is a Hong Kong-listed industry leader, and remains a leader in the global PC industry," said Miles Xie, an analyst at BOCOM International.
A BOCOM report posted "buy" for Lenovo with a target price of HK$13, which is about 19 percent higher than the share's closing price on Oct 13. Deutsche Bank and Morgan Stanley are also upbeat about Lenovo's future, offering share price projections of HK$13.20 and HK$11.50, respectively.
"Lenovo's share price declines are in line with worldwide market slumps rather than its own business troubles. The tumbles on European bourses and China's slower GDP growth, as well as the current protests in Hong Kong, have all dragged down Lenovo's share price," Paul Pong, managing director at Pegasus Fund Managers Ltd, told China Daily on Monday.
"Lenovo has just completed its acquisition of IBM's x86 server business for $2.1 billion, $200 million less than the initial announcement in January, and this will also contribute to the share's uptrend. So, I expect its price to climb to HK$12 or HK$13 by the end of the year, about 15 percent higher than today's closing price," Pong said.
Yang Yuanqing, Lenovo's chief executive officer, said he expects IBM's server unit, combined with Lenovo's own server business, to rake in combined revenues of $5 billion in the first year of the acquisition. Actually, the unit has lost market share to its competitors as the announcement of Lenovo's acquisition plans in January fueled concerns among customers about the transition, he said.
However, Yang said he's determined to win back the lost positions as the deal's closure would ease those concerns and allow the mainland company to challenge its main rivals, Hewlett Packard and Dell. "After our business is stabilized, we'll challenge the top two," Yang said. "We want to win more market share from our competitors."
Shuli Ren, an emerging market columnist at Barron's, said on Monday he believed the reason for Lenovo's share price slump is that "the market was looking for bad news, sending the company's share price down by 3.7 percent this morning." "I believe the data from market researcher IDC (Internet Data Center) is really not bad, but market sentiment remains weak for bad news," Ren said in a report.
According to IDC, global PC shipments fell by 1.7 percent in the third quarter as weakness in emerging regions outweighed improved corporate demand. The decline was smaller than the 4.1-percent drop IDC had projected. PC sales shrank to 78.5 million units - from 79.9 million a year earlier as smaller vendors lost out to the top three PC makers.
Bucking the downtrend, Lenovo shipped 15.7 million PCs, with the growth of 11 percent in the third quarter compared with a year ago, giving it a 20-percent global market share for the first time. Yang described the achievement as a "great milestone for Lenovo" which has come sooner than expected.
The company also unveiled three new products for its Yoga line of tablets known as the Yoga Tablet 2, Yoga Tablet 2 Pro and the Yoga 3 Pro, marking the first time a Yoga tablet model includes a version running Windows in addition to the latest Google Android operating systems. The "innovative and stylish" Yoga products will become very popular presents for the holiday season, Yang added.
While fierce competition in the PC and tablet markets also exerts tremendous pressure on Lenovo, new iPhones coming onto the market and Samsung cutting prices of its products will make Lenovo feel the squeeze further, Pong said.
celia@chinadailyhk.com
(HK Edition 10/14/2014 page9)