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Lenovo Misses Forecasts Despite Doubling Earnings

Lenovo Group, the world's No.4 PC maker, lagged forecasts despite doubling quarterly earnings, as a one-off gain from the sale of its mobile arm and strong sales in a resilient China market failed to offset stiff competition and a U.S. slowdown in notebook sales.

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A slowdown in spending on personal computers in the United States has forced bigger rival Dell to shed jobs and shake up its business, but analysts say Lenovo, which also vies with Hewlett-Packard and Acer, should fare better because of a commanding presence at home and in emerging markets.

Analysts now expect Lenovo, which bought out IBM's PC division in 2005 for $1.25 billion, to explore more acquisitions after it failed to buy Europe's Packard Bell last year. An aggressive Acer, which overtook Lenovo in global PC sales last year, picked it up instead.

China's largest PC maker posted a net profit of $120.5 million from January to March, versus a $60 million profit a year ago, according to Reuters calculations off full-year figures. The firm completed the sale of a loss-making mobile business in the period, reaping a $65 million pre-tax gain.

The results lagged expectations for $129.2 million, the mean forecast of five analysts polled by Reuters.

Including profit from the sold cellphone division – a discontinued operation -- net profit for the quarter came to about $140 million, the company said.

The firm posted a net profit of $484.26 million for the full fiscal year, including a $19.92 million contribution from the cellphone division that it sold. Lenovo had been expected to post a full-year net profit of $414.6 million, more than double the $161 million of the previous fiscal year, according to 14 analysts surveyed by Reuters Estimates.

The company shipped 21 percent more PCs globally in the January-March period, boosting its worldwide share to 6.9 percent in the quarter from 6.6 percent a year earlier, according to IT consultants IDC.

In Asia excluding Japan, Lenovo expanded its leading market share to 16.4 percent in the first quarter from 15.8 percent a year ago on unit growth of 23.7 percent.

Shares in Lenovo fell 29 percent from January to March, versus a 18 fall in the benchmark Hang Seng Index.

It trades at 17 times prospective earnings -- pricier than Dell's 14.3 and HP's 13.4, according to Reuters Estimates.