Stronger Steady-State Profitability in ISG Keeps Us Sanguine on Lenovo's Long-term Earnings Growth
Lenovo’s acquisition of IBM’s ThinkPad PC business in 2005 has helped propel the company to be a leader in the PC market with a 24% global market share. The successful integration of the ThinkPad business has also enabled Lenovo to increase its commercial-related sales, which currently make up 60% of its PC sales, as well as stabilize its PC margins in recent years. We expect PC sales to continue to make up around 60%-70% of overall sales, while the segment’s profit margins should remain stable, given less intense competition at the higher end of the PC market. Lenovo's strong brand equity should also allow it to more effectively pass on higher component costs to customers.
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