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Lenovo's Third-Quarter Profit Jumps

Lenovo Group posted its strongest pace of quarterly earnings growth since it bought IBM's loss-making PC arm in 2005, as the world's No. 3 PC maker cemented Asian market share and held costs down.

Investors will be looking at how the PC giant further overhauls itself in 2007 to regain ground lost globally, especially with the release of Microsoft's Vista operating system.

Lenovo has struggled to make headway outside the region and has been grappling with expenses arising from layoffs and corporate streamlining after its U.S.$1.25 billion purchase of IBM's ailing PC arm.

That comes amid competition from bigger rivals Dell, with founder and chairman Michael Dell now back at the helm, and Hewlett-Packard.

Lenovo, one of a handful of Chinese companies trying to craft a global brand, earned U.S.$57.7 million in the three months through December, up 23% from U.S.$46.8 million a year ago.

The result beat marginally a consensus mean forecast for net income of HK$440.25 million (U.S.$56.4 million), according to four analysts polled by Reuters Estimates.

Shares in Lenovo finished Thursday up 1.9% at HK$3.23, outpacing slightly the main index's gain of 1.6%.

Lenovo's stock rose 3.3% from October to December, lagging a 13.8% gain in the main index, a 9.9% rise by Dell and HP's 12.3% gain over the same period.

Lenovo's dominant share in Asia, excluding Japan, grew to 21.6% in the calendar fourth quarter, up from 20.7% in the previous quarter. But shipments declined in the United States and Japan, and modest volume gains in other regions were not enough to preserve share, IDC said.

Analysts attribute the market-share slide to unattractive product design, lack of distribution channels and little experience in the international market.

Chairman Yang Yuanqing told Reuters in September it would take at least three years to return to strong profitability as competition intensifies and corporate demand lags.