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Lenovo's Still Outperforming Its Stock Price

NEW YORK ( TheStreet) -- Through no fault of its own, Lenovo (LNVGY) is still far from being a household name in the U.S. despite having established a strong international presence on the strength of historically solid execution.

While Lenovo falls short in sex appeal compared to Apple (AAPL) and Google (GOOG), this company is second to none in terms of efficiency and maximizing capital deployments.

I won't argue there's risk in falling in love with a leader in a dying PC industry. Lenovo is second to Hewlett-Packard (HPQ) in global market share by the slimmest of margins (40 basis points). This company has shown an uncanny ability to grow where rivals such as Dell (DELL) and Acer have failed.

What's more, with management's focus to diversify Lenovo's hardware business into smartphones and mobile devices, there's plenty of long-term value here, especially given its entry in high margin businesses including enterprise services. The company's cash totals $4.5 billion with marginal debt and Lenovo is one acquisition away from becoming interesting.

Despite Lenovo's reputation for strong performance, not much was expected heading into this quarter. Not only did IDC recently report a 14% drop in global PC shipments given the fact that HP and Dell reported revenue declines of 10% and 2% respectively, but the market was expecting unassuming results from Lenovo. But Lenovo had other ideas.

The company earned $126.9 million in net income. Not only did this beat Street estimates of $110 million but the 90% year-over-year profit surge (up from $66.8 million) was the fastest performance for Lenovo over the past seven quarters. This made me question how the Street could cheer HP's 31% decline in GAAP earnings per share.

On the revenue front. Lenovo's 4% growth really stood out. I will admit that this was not up to the company's usual standards (up 12% last quarter). But Michael Dell and Meg Whitman would have done cartwheels if Dell and HP could yield half of that performance. Besides, the revenue results were still enough to help Lenovo acquire an additional 3% in global PC market share.
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