Lenovo's smartphone, tablets outsell PCs in first quarter

Lenovo’s sales of tablets and smartphones were higher than that of PCs in its fiscal first quarter, reflecting the company’s efforts to reduce its dependence on the ailing PC business.

The company reported on Thursday that net profit jumped 23 percent during its first fiscal quarter ended June 30.

Lenovo’s net profit reached US$174 million, up from $141 million in the same period a year ago. Its revenue was $8.8 billion, a year-over-year increase of 10 percent.

The Chinese PC maker reported the positive earnings for a quarter when it beat HP to become the world’s largest PC maker, according to research firm IDC. During the period all of the top five PC vendors saw decline in shipments, with Lenovo’s down year-over-year by 1.4 percent.

Despite the struggling PC market, Lenovo has largely seen strong growth by focusing on selling PCs in its home turf of China, where it receives 42 percent of its revenue, and in other emerging markets. At the same time, the company also focused on developing smartphones, tablets and smart TVs as a way to expand its business.

In China, Lenovo ranks as the second largest vendor of smartphones, putting it behind Samsung, according to research firm Canalys. The Chinese market is so large that Lenovo’s market share in the country has made it the third largest smartphone vendor in the world. Year-over-year, its smartphone shipments worldwide were up 131 percent in the quarter, reaching 11.3 million units.

Most of the company’s smartphones are sold in China, but the company has also started selling the devices in Southeast Asia, Russia and India. In the future, the company will bring its smartphones to the U.S. and Europe.

The company’s mobile devices business, which covers smartphones and tablets, saw its revenue increase 105 percent year-over-year in the period, reaching $1.2 billion. This made up 14 percent of the company’s total revenue in the quarter.

In the PC space, Lenovo plans to introduce a next generation of its IdeaPad Yoga product later this year, the company’s CEO Yang Yuanqing said during the earnings call Thursday. Its previous Yoga product works as a convertible PC that can be turned into a tablet.

“I believe the PC is a more powerful, multi-function device, people still need this product,” he said. “It’s still a $200 billion market industry.”

In addition, the company will also introduce a new “multi-mode” tablet. Worldwide, the company’s tablet sales were up more than three times, year-over-year in the period.