September 17, 2019

Mobile Devices Overtake PC Sales at Lenovo

That milestone, which the company announced Thursday, underlines the growing influence of Chinese companies like Lenovo in the shift from desktop to mobile computing. Now even Lenovo, which acquired I.B.M.’s PC business in 2005 and sells ThinkPad notebooks, is remaking itself for a post-PC era.

Lenovo said its sales of smartphones had more than doubled in the three months that ended June 30, to 11.4 million. The company also sold 1.5 million tablet computers.

Executives said Lenovo had benefited from a structural shift in the smartphone business, where the high end, dominated by Apple and Samsung Electronics, is showing signs of saturation. Sales of less expensive handsets made by Lenovo and other Chinese companies, like Huawei and ZTE, are growing more rapidly. “The recent change in the market favors Lenovo and our business model,” Yang Yuanqing, chief executive of Lenovo, said in a conference call with analysts. “The market is shifting from the premium part to the mainstream. It is shifting from the mature markets to the emerging markets.”

Lenovo was the fourth-largest maker of smartphones worldwide in the second quarter, according to IDC, a research firm, with a market share of 4.7 percent, up from 3.1 percent a year earlier.

The company’s smartphone business relies heavily on China, which accounts for about 80 percent of sales, but Lenovo is trying to expand its global presence.

On Thursday, Lenovo executives declined to comment on speculation about a possible bid for BlackBerry, which has put itself up for sale. But Lenovo made it clear that it did not plan to rely on internal, or “organic,” growth alone.

“Given its solid financial position, the group will continue to actively look for inorganic growth opportunities which will supplement its organic growth strategy to accelerate future expansion,” Lenovo said in its latest quarterly earnings report.

Analysts say acquisitions might be a way for Lenovo to address some of the shortcomings of its smartphone arm, including the low prices that its devices command — an average of less than $100 in China, while devices like Apple’s iPhone 5 and Samsung’s Galaxy S4 cost more than $700 in that country.

Because of the low prices, Lenovo’s smartphone and tablet arm generated only 14 percent of the company’s revenue in the most recent quarter. The company remains heavily reliant on its PC division for sales and earnings, even though that business is shrinking.

Lenovo has managed the decline better than some of its rivals. Its shipments of computers slipped 1.4 percent in the second quarter, to 12.6 million, compared with a decline of 11 percent in the overall market, according to IDC. As a result, Lenovo overtook Hewlett-Packard and become the world’s largest PC maker in the period. That helped Lenovo post a 23 percent increase in net income, to $174 million, for its financial first quarter, which ended in June. The results were above analysts’ expectations.

Despite the solid performance of the PC division, company executives have taken to calling Lenovo a PC-plus company. Mr. Yang stuck with a previous forecast that the company would sell 50 million smartphones and 10 million tablets in the current quarter. But he acknowledged that Lenovo still had work to do in getting out the message about its mobile devices in markets beyond China.

“We still need to invest in the branding, we still need to invest in the channel and network building,” he said.

In China, Lenovo’s mobile business is growing rapidly. Canalys, a research firm, said it had shipped 10.8 million smartphones there in the second quarter, second only to Samsung, with 15.5 million. That is a strong base from which to develop new phones for other price-conscious developing markets, analysts say.

“The whole dynamic favors Lenovo a lot,” said Jenny Lai, an analyst at HSBC. “If you are No. 2 in the largest market in the world, your suppliers will come to you.”

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DealBook: Facing Legal Costs, Citigroup Disappoints in 4th Quarter

A 'Citi' sign near the bank's headquarters in Manhattan.Mario Tama/Getty ImagesA ‘Citi’ sign near the bank’s headquarters in Manhattan.

Citigroup, which has been working to cut costs and unload troubled assets, continues to struggle under the weight of its mortgage woes.

The bank reported fourth-quarter profit of $1.2 billion, or 38 cents a share, significantly below analysts’ estimates. Excluding one-time items, earnings amounted to 69 cents a share.

Ahead of the bank’s quarterly earnings, analysts estimated earnings at 96 cents a share, according to a survey by Thomson Reuters. In the period a year earlier, the bank posted profit of $956 million, or 31 cents a share.

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The disappointing quarter relates to continuing legal problems, as the bank works to clean up the mortgage mess stemming from the financial crisis. In the fourth quarter, Citigroup had $1.3 billion of legal costs and related expenses.

Citigroup has also faced increasing pressure from shareholders to buoy its returns. As part of that effort, the bank has been working through a glut of soured loans and unloading less-profitable business lines while systematically reducing costs. In December, the bank announced that it would eliminate 11,000 jobs worldwide, part of a much larger contraction.

“Our bottom line earnings reflect an environment that remains challenging,” Michael L. Corbat, the bank’s chief executive, said in a statement. “It will take some time to work through the challenges of the current environment but realizing our core earnings potential, as well as improving our returns on assets and tangible equity, are critical goals going forward.”

Beneath the headline numbers, Citigroup did experience gains in some of its businesses.

The bank has been focusing on developing countries, where there are comparatively more growth opportunities than in the United States. Within the global consumer banking group, revenue increased 4 percent, to $4.9 billion, in the fourth quarter. Revenue in North America rose 3 percent, to $5.3 billion.

Citigroup’s securities and banking group also improved, on the strength of investment banking, equities and fixed income. The unit reported net income of $629 million for the quarter, compared with a $158 million loss in the period a year earlier.

Emphasizing improvements in the bank, John C. Gerspach, the bank’s chief financial officer, said on a conference call on Thursday that the bank had gained “client wallet share” in its investment banking business.

The fourth-quarter earnings are the first under Mr. Corbat’s leadership.

In October, the bank’s powerful chairman, Michael E. O’Neill, abruptly ousted Vikram S. Pandit as chief executive. Since taking the reins of the bank, Mr. Corbat has vowed to continue to revamp the bank, focusing on its core businesses and exiting less profitable areas.

Such efforts have weighed on the bank’s bottom line in the short term. In the fourth quarter, Citigroup’s operating expenses rose 5 percent, to $13.8 billion.

Along with its strategic moves, Citigroup also paid for its legal problems. Like rivals, the bank faces claims that it used shoddy documents in foreclosure proceedings that might have led to wrongful evictions.

Citigroup, along with nine other banks, agreed this month to sign on to an $8.5 billion settlement with the Federal Reserve and the Office of the Comptroller of the Currency. The settlement will allow Citigroup to move beyond an expensive review of loans mandated by regulators in 2011.

On the earnings call, Mr. Gerspach hinted that the banking industry’s legal woes were not over. “I think that the entire industry is still looking at some additional settlements that are still yet to appear,” he said.

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Career Couch: Annual Reviews, and How to Prepare for Them

A. Start by making a list of your responsibilities at work and writing your own performance review in each of those areas, says Shawn Kent Hayashi, the founder of the Professional Development Group and the author of “Conversations for Creating Star Performers.” “Thinking through how you’ve done,” she says, “will prevent you from overreacting to feedback because you know what to expect.”

Annual reviews give you the chance to discuss and formulate goals for the next year. Before the meeting, write down the goals you envision for yourself. These can be very specific, like reaching a certain sales target or mastering particular software, or something more general, like increasing professional development activities, says Stephen R. Balzac, president of 7 Steps Ahead, a management consulting firm in Stow, Mass., and a professor of organizational psychology at the Wentworth Institute of Technology in Boston.

As you think about your work over the last year, try to anticipate anything negative that may come up in the review. Prepare for it by looking over old notes and e-mails to remember specific situations and your actions and behavior at the time, Mr. Balzac says. Good preparation will reduce anxiety.

Q. At the review, you get some very positive feedback. Can you use it as a springboard to ask for something you want?

A. Build on those positive feelings by saying you want to go further in 2012. “Talk about your strengths, how you want to use those to help the organization and where you see growth opportunities for yourself at the company,” says Kimberley Bohr, senior vice president for client development at Fierce, a leadership development firm in Seattle. If you have something specific in mind, like a role on a particular project, this is the time to bring it up, she says.

If you work for a very small company where the owners make decisions about pay raises, your review could be an appropriate time to ask for one, as long as you are a high performer, Ms. Hayashi says. Bigger companies, however, have a formal budget process and your boss will probably have to get approval from higher-ups to give you an increase. That can take a few months, she says, so bring up the issue to your boss at least two months before your review.

“There should never be surprises during your performance review, because it’s a summary of all the conversations you’ve had prior to it,” Ms. Hayashi says. “And that includes one about compensation.”

Q. What if the feedback is unexpectedly negative?

A. Even though your manager should have given you some advance warning of the criticism, take a deep breath before you speak, and don’t be defensive. “You never want your performance review to be confrontational, so start by thanking your manager for the valuable feedback,” says Ms. Hayashi, whose firm is based in Center Valley, Pa.

It’s important to be clear about the specific behavior your manager is criticizing, so ask for examples to help you better understand the problem. If your boss says you are too aggressive in meetings, for example, ask for instances of that behavior.

“Then ask your manager what she would recommend to help you improve in that area,” Ms. Hayashi says. “Would she be willing to guide your development to turn that around over the next 30 to 90 days? Suggest checking in each week about it.”

Q. Performance reviews offer a chance for you to plan your career development — and you don’t want to squander that. What should you talk about?

A. Broadly, the discussion should center on your future at the company and your professional aspirations. Show that you are optimistic and excited about both, says Patrick Sweeney, president of the management consulting firm Caliper in Princeton, N.J., and co-author of “Succeed on Your Own Terms.”

“Be as specific as you can about what you want moving forward, such as: ‘In three years I’d love to be leading projects. How can I move in that direction this year?’ ” he says.

It’s also important to take some control of your manager’s perception of you.

“So many companies have gone through cutbacks in personnel that those left are doing more than their own jobs,” Mr. Sweeney says. “Your boss knows more is getting done, but here is your chance to let him know exactly what you have been doing and why you can handle other opportunities within the company.”


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Rash to Some, Stock Buybacks Are on the Rise

In fact, the drug maker had so much cash left over, it decided to buy back an additional $5 billion worth of stock on top of the $4 billion already earmarked for repurchases in 2011 and beyond.

The moves, announced on the same day, might seem at odds with each other, but they represent an increasingly common pattern among American corporations, which are sitting on record amounts of cash but insist that growth opportunities are hard to find.

The result is that at a time when the nation is looking for ways to battle unemployment, big companies are creating fewer jobs, and critics say they are neglecting to lay the foundation for future growth by expanding into new businesses or building new plants.

What is more, share buybacks have not fulfilled their stated purpose of rewarding investors over the last decade, experts say. “It’s a symptom of a deeper problem, which is a lack of investment in the long term,” said William W. George, a Harvard Business School professor and former chief executive of Medtronic, a medical technology company. “If we’re not investing in research, innovation and entrepreneurship, we’re going to be a slow-growth country for a decade.”

Liberal critics insist the trend is another example of top corporate executives raking in an inordinate share of the nation’s wealth, even as their employees suffer.

“It’s an extraordinarily unimaginative way to use money,” said Robert Reich, a former secretary of labor under President Clinton who now teaches public policy at the University of California, Berkeley. After diving in the wake of the financial crisis, buybacks have made a remarkable comeback in recent years, with $445 billion authorized this year, the most since 2007, when repurchases peaked at $914 billion.

But spending on capital investments like new plants and infrastructure has stagnated more broadly in corporate America, confounding efforts by the Obama administration to spur economic growth. Capital expenditures by companies on the Standard Poor’s 500-stock index are expected to total $546 billion in 2011, down from $560 billion in 2008, according to data compiled by Thomson Reuters Eikon.

The principle behind buybacks is simple. With fewer shares in circulation, earnings per share can rise smartly even if the company’s underlying growth is lackluster. In many cases, like that of the medical device maker Zimmer Holdings, executives are able to meet goals for profit growth and earn bigger bonuses despite poor stock performance.

“It’s clear there’s a conflict of interest,” said Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “Unless earnings per share are adjusted to reflect the buyback, then to base a bonus on raw earnings per share is problematic. It doesn’t purely reflect performance.”

In addition, executives, who are often large shareholders, stand to benefit from even a small, short-term jump in stock prices.

Earlier this month, Pfizer increased its estimate for stock repurchases this year to between $7 billion and $9 billion — essentially spending in one year nearly all of the money it set aside in February for multiyear buybacks. There has been a steady drumbeat of other companies laying off workers even as they have disclosed plans to buy back more stock. On June 23, Campbell Soup said it would buy back $1 billion in stock; five days later it announced plans to eliminate 770 jobs. Hewlett-Packard announced a $10 billion stock repurchase in July, and jettisoned 500 jobs in September after it discontinued its TouchPad and smartphone product lines.

Last month, the first layoffs began at Zimmer’s plant in Statesville, N.C., which is due to shut early next year. The company made splints and tourniquets there for more than three decades. For the sewing machine operators and the rest of the 124 workers at the plant, it is bad news, but it is a different story for Zimmer’s top executives.

Powered by huge stock buybacks — the company bought $500 million worth of its own shares last year, more than twice what it spent on research and development — Zimmer posted earnings growth of 10 percent a share, even though operating income and revenue grew by less than 5 percent in 2010.

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