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LENOVO GROUP ANNOUNCES 2003/04 ANNUAL RESULTS

   

(Hong Kong, June 2, 2004) - Lenovo Group Limited ("Lenovo") (stock code: 992) today announced its annual results for the fiscal year ended March 31, 2004.

Liu Chuanzhi, Chairman of Lenovo said, "In the past fiscal year, Lenovo had triumphed over the adverse impacts of the SARS outbreak, attaining respectful performance in regard to the general market condition. We maintained our market share position and achieved notable growth in turnover. As Chairman of the Board, I applaud the achievements made by our management team during the year ridden with exceptional challenges."

Yang Yuanqing, President and CEO of Lenovo said, "In the 2003/04 fiscal year, the Group saw steady business growth with respectful results, although affected by the investment in the new businesses. Adopting a more focused strategy in the coming year, the Group aims at developing its PC business into a sustainable and international business. Leveraging the Lenovo brand and existing resources, the handset business has seen encouraging trend. The Group will continue to invest and develop this business. For the non-core businesses, the Group will adopt more flexible approaches such as introducing new partners to jointly develop the businesses."

Yang continued, "The Group will implement active strategy to boost its PC business: to build stronger ties with its customers, to win more customers and to serve them on a long-term basis. Our powerful sales forces have already penetrated in our 18 regions and 108 sales networks in China. With a combined sales model, we will be able to secure a wide range of customers, thus filling the gap that left by only using channel distribution model. At the same time, we will be able to better cover the diversified needs of large corporations and more diverse groups of customers, while strengthening our advantages in meeting needs of individual customers and SMEs."

In the 2003/04 fiscal year, Lenovo's overall turnover rose 14.5%, net profit increased 3.5%. In 2003, competition was intense in China's corporate IT market. While demand shrunk in the government and education sectors as a result of the SARS outbreak, orders surged among SMEs and in local municipal markets. Lenovo's corporate IT business achieved an increase of 10.4% in turnover over the year, and notebook computers reporting outstanding performance with an increase of 51.0% in unit shipment. During the year, the Group launched the first Collaborating notebook computer "Soleil E600", and the Collaborating PC "Kaitian II". The new products were well-received by the market.

The consumer IT market experienced steady growth in 2003. Consumer PC sales were enhanced by increase of family income and continuous improvement in quality of living in China. The SARS outbreak also stimulated short-term sales. During the period, Lenovo's consumer IT business reported an increase of 13.8% in turnover, resulting from its effective customer segmentation. Recognising the growing need for mobile computing among consumers, the Group launched the "Tianyi" consumer notebook computer. The product's unique exterior design and multimedia functions helped boosting the Group's market share of the notebook computer market to over 30%. As for handsets, unit shipments increased 90% during the year, meeting the Group's sales targets. The proportion of proprietary products increased gradually contributing 64.2% of the Group's handset shipment this year.

In March 2004, Lenovo joined the Olympic Partner Programme. This is the first time a Chinese enterprise joined the International Olympic Committee's top-level worldwide marketing programme. Over the next four years the Group will exclusively provide computing equipments, technological support and funds to the 2006 Turin Olympic Winter Games and 2008 Beijing Olympic Games.

Looking ahead, Yang said, "The China IT market is expected to see steady growth in 2004, with notebook computers making the limelight in the market. As for desktop PCs, sales are going to peak as consumers seek to replace equipments bought between 1999 and 2000 for Internet capabilities and the "Y2K" transition. This growth trend in the consumer IT market will be further fueled by the expanding applications and usage of the broadband network. The continuous evolution of the different sectors, such as the government, education and manufacturing will also enhance the stable growth of the corporate IT market."

Liu concluded, "As Chairman of the Board, I have every reason to believe Lenovo is able to fully realise its competitive advantages after the strategic adjustments are completed, and seize opportunities for breakthroughs in the long run."