Lenovo Group increased marketing dollars and offered cheaper product during their first quarter. The result: China?s largest personal computer manufacturer?s net income April – June was only $54.9 million, disappointing analysts, who?d expected $4.9 million more. Truth to be told, during the same period last year, Lenovo was $16 million in red.
The company did not release overall revenue figures, though.
Trying to gain customers in emerging markets, Lenovo is producing low-priced products. Trying to increase mobile phone sales, they are spending more on marketing efforts. The company is sacrificing a bird in the hand for two in the bush ? trading current profits to acquire future market share. Their stock, like their revenue, has gone down this year as they bet on future profitability.
The company?s sales in China went up 50 percent, making them 49 percent of the company?s total. On the other hand, R&D costs rose 56 percent last quarter. However, it looks like it is paying off, as Lenovo was able to start selling their smartphone, LePhone, in China in May. Sales from India, Brazil and Russia, considered emerging markets, increased by 80 percent. Lenovo?s strategy seems to be working.
