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Lenovo revenue slips; prepares for IBM buyout

Lenovo revenue slips; prepares for IBM buyout

China's Lenovo Group on Friday reported that its total group revenue for the three months to Dec. 31 dropped by almost 4 percent compared with the same period a year earlier. At the same time it announced a range of senior management appointments that will be made when its acquisition of IBM's PC business is completed.

Lenovo's total revenue for its fiscal third quarter was HK$6.3 billion (US$810 million as of the last day of the period being reported), down from HK$6.6 billion a year earlier, it said in a statement. Lenovo did not offer an explanation for the lower turnover. Revenue from its core PC business increased by 4 percent, the company said.

Despite the drop in group revenue, Lenovo's profit attributable to shareholders remained relatively flat from a year earlier, growing less than 1 percent to HK$327.2 million, the company said.

"Generally, this is a very encouraging result," said Helen Lau, an analyst at Celestial Asia Securities Holdings, in Hong Kong. She cited the strong performance of Lenovo's PC business and its reduction of operating costs as encouraging signs.

The 4-percent drop in revenue was due mainly to a 90-percent drop in the sale of products not related to Lenovo's core PC business, Lau said.

Lenovo's plans to acquire IBM's PC business are on track, it said, despite the U.S. government's decision to conduct an extended review of the deal on national security grounds. Lenovo also claimed broad support among IBM customers for the acquisition, saying that more than 90 percent of IBM's PC customers viewed the deal favorably.

That contrasts with the results of a Merrill Lynch survey published this week, in which 45 out of 100 chief information officers surveyed said they will consider switching PC vendors as a result of the Lenovo-IBM deal.

Lenovo's announcement of its future management team contained no surprises. Yang Yuanqing, its current chief executive officer (CEO) and president, will become chairman of Lenovo following the acquisition, and Stephen Ward, senior vice president and general manager of IBM's PC Division, will become Lenovo's CEO, according to the company.

Lenovo will appoint two chief operating officers (COOs), with responsibilities for the company's business in China and the rest of the world, respectively. Lenovo Senior Vice President Liu Jun will become COO of Lenovo China while Fran O'Sullivan, the general manager of IBM's PC business, will be COO of Lenovo International, the company said.

Other top positions will be split among executives drawn from both companies. Lenovo CFO Mary Ma will remain in her current position after the acquisition. Deepak Advani, vice president of marketing and strategy for IBM's PC business, will become chief marketing officer of Lenovo, and Ravi Marwaha, vice president of worldwide sales for IBM's PC business, will assume responsibility for Lenovo's global sales, it said.

George He, senior vice president of Lenovo, will take charge of Lenovo's global R&D operations after the acquisition. Peter Hortensius, vice president of products and offerings for IBM's PC division, will be appointed vice president of worldwide product development, Lenovo said.


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