Lenovo announced several new smartphones in the quarter, including the Android-based K900 phone with a stainless steel alloy and polycarbonate case which is just 6.9mm thick with a 5.5-inch display and an Intel Atom Z2580 2.0 GHz dual-core processor. The metal finish will add a bit of weight to the phone, increasing it to 162 grams, making it heavier than HTC’s One, Samsung’s Galaxy S4 and Apple Inc. (NASDAQ:AAPL)’s iPhone 5.
A little more than a year ago, Lenovo became the second biggest player in China’s smartphone market by surpassing Coolpad. Since then, the company has been improving on its lead and is still the second leading player behind Samsung which has a market share of 17.1%.
For Lenovo, the company’s smartphone segment is increasing its contribution to the top line while both desktop and laptops are doing the opposite; this is mainly due to the phenomenal growth of MIDH segment, however. This trend is expected to continue in the coming years. I believe that the lull in PC sales will eventually hit Lenovo, as revenues are already down from last year. But the company has been able to successfully diversify itself into smartphones and this unit has the potential to offset the downfall of PC. I fully expect Lenovo to continue increasing its market share in the coming years and I am long-term bullish on this company.
On the other hand, Hewlett-Packard Company (NYSE:HPQ) believes that it will take it five years to execute its plans and turnaround the company. HP has a long and challenging road ahead following the disastrous acquisition of Autonomy. The shuffling of its top management, with four departures in 2011 followed by five new faces, is still ongoing as it is looking for a “world-class chairman.” Given the current state that the company is in, I have my doubts over its ability to attract any “world-class” individual. Its investors haven’t seen any top-line quarterly growth in the last two years. Drastic cost-cutting initiatives, such as the planned 29,000 job cuts by 2014, are going to drive its earnings and HP itself is not expecting any revenue growth until then.
On a positive note, Hewlett-Packard Company (NYSE:HPQ)’s income and cash generated from investors was greater than analysts’ expectations. This, coupled with the revenue decline, indicated that the company is willing to forego revenue growth to protect its income, which given the current circumstances is a step in the right direction. Investors should note that although HP’s shares have risen by more than 90% in the last six months, the stock still trades just 6.9 times its full-year forward price-to-earnings ratio. There are too many negatives and uncertainties surrounding this company, however, some of which have been discussed above. Therefore, I would not recommend HP.
Sarfaraz Khan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Sarfaraz is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Contrasting the Performance of Two PC Giants originally appeared on Fool.com and is written by Sarfaraz Khan.
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