"The story remains the same -- market share gains and margin expansion," Citigroup analyst Kirk Yang said. "Lenovo's transactional model and new consumer focus allow it to enter a previously untapped market, while it has benefited from exposure in the emerging market with higher growth."
Lenovo's gross margins inched higher to 15.1 percent in the quarter from 13 percent a year earlier, propped up by a sharp improvement in Europe, the Middle East and Africa, which executives attributed to cost control and a strengthening euro.
In 2008, the firm hopes to roll out new PCs to try and capture more of the consumer space, but also business-oriented workstations and servers to buoy margins.
Lenovo, China's top computer maker, earned a net profit of $105.26 million in its fiscal second quarter ended September, compared with $37.89 million a year earlier.
That trumped an average forecast for US$88 million, according to five analysts polled by Reuters Estimates.
And it handily outpaced Acer's 58 percent earnings growth over the same period. The Taiwanese PC giant said it expected to control 11-12 percent of the global market in 2008, after having absorbed U.S. vendor Gateway last month.
"We're in the middle of a replacement cycle," Chief Executive William Amelio told analysts on a conference call. "That's why you see a firming up of demand."
A Global Footprint
Investors will wait to see if Lenovo's consumer push globally -- anchored by its dominant market position back home, the world's second-largest PC arena -- will depress margins.