Digital Media

After three quarters of losses, Lenovo has turned a profit again. The computer maker announced Thursday that its fiscal second-quarter earnings more than doubled to $53 million versus $23 million a year ago.

Profit for the quarter ended September blew way past estimates of only $24 million from analysts surveyed by Bloomberg.

Despite a 5.2 percent sales decline to $4.1 billion from $4.3 billion in the year-ago quarter, Lenovo achieved its profits through extensive cost cuts and a record leap in market share.

(Credit: Lenovo)

The company had previously kick-started a major restructuring program designed to trim expenses and streamline business operations. As a result, Lenovo was forced to lay off a sizable number of employees and take a one-time restructuring charge of $3 million in the second quarter. But the company now expects to save around $300 million annually.

During the quarter, Lenovo says it also saw its worldwide PC shipments surge 17 percent over the prior year, dramatically outpacing the industry average of only 2.3 percent.

"In the last quarter, our share in the global market climbed to a historic high and we returned to profit," said Lenovo CEO Yang Yuanqing in a statement. "At the same time, our expenses-to-revenue ratio improved notably, reaching the best level since the acquisition of IBM's PC division. These achievements bear witness to the clear strategies we set at the beginning of the year and our effective execution of those strategies."

Lenovo's quarterly results were powered by its notebooks, which contributed 63 percent to overall revenue. Though notebook sales dipped 1 percent from the prior year, shipments shot up 37 percent, compared with an industry average of 16 percent.

During the quarter, the company unveiled a few new products, including the IdeaPad U450p, a thin and light consumer laptop, and SimpleTap, an application to help users navigate the touchscreens on Windows 7-enabled machines like the ThinkPad X200 Tablet and ThinkPad T400s.

Desktop sales, however, fell 13 percent from the prior year's quarter, kicking in only 35 percent to Lenovo's overall revenue. Desktop shipments fell 2 percent, but outpaced the industry average of a 12 percent decline. The company said it has reacted to the PC market shift from desktops to laptops by introducing new entry-level low-cost desktops and revamping its product line for small and medium-sized businesses.

Lenovo enjoyed a stellar second quarter in its home base of China where sales jumped 9 percent to $2 billion. Shipments in the country jumped 28 percent compared with the average of only 0.1 percent. Already the leading PC vendor in China, the company boosted its market share there to 29.4 percent.

Earlier this year, Lenovo said that it would refocus its efforts on China and other emerging markets, a strategy that appears to have paid off.

"Our results are moving in the right direction and we are particularly pleased with our performance in China and in the transactional business model," said Lenovo Chairman Liu Chuanzhi in a statement.

The year had been a volatile one for Lenovo. The company was hit a string of quarterly losses, leading to the resignation of President and CEO William Amelio in February. Job cuts and the restructuring also took their toll.

But based on its second quarter, Lenovo is optimistic about the near term.

"In the coming quarters, we will continue to reinforce our leadership in China, improve the sustainability and profitability of mature markets, seize growth opportunities in emerging markets and our transactional business, continue to strengthen cost structure, and innovate with raising efficiency and customers' needs in mind," said Chuanzhi.

Amazon.com is apparently shelving its planned effort to sell wine online.

A little more than a year after word of the effort trickled out, a senior Amazon account manager told wineries about the decision to cork it in an e-mail last week.

"As you know, we were excited to work with you to build the AmazonWine business," Dini Rao said in an e-mail first reported by WineBusiness.com. "For that reason, this was a very tough choice for us. Many of you took the time and leap of faith to really support us."

Amazon representatives did not immediately respond to requests for comment.

Word of the effort leaked out in September 2008 when a nonprofit vintner group announced it had partnered with Amazon to drum up interest from its members to sell wine through the retail giant. However, its fulfillment partner New Vine Logistics briefly suspended operations this summer before securing additional financing from Inertia Beverage Group.

Since the Supreme Court ruled in May 2005 that states must grant the same shipping rights to out-of-state and in-state wineries, winery-to-consumer shipping has become legal in 35 states, according to wine advocacy group Free the Grapes. But state laws governing direct wine shipping vary greatly, creating an onerous task in managing compliance.

Amazon had dabbled in the wine business before, investing $30 million for a 45 percent share in Wineshopper.com in 1999, a start-up that was acquired by Wine.com in 2000 before going through a series of layoffs. Wine.com has a storefront on Amazon, through which it sells gourmet food baskets but not wine.

(Credit: The Onion)

This just in: things are so miserable in the news business that you can't even turn a buck in the fake news business.

The Onion, a print publication that satirizes the news, is for sale, according to a story that appeared Wednesday in Gawker.

Citing an unnamed source, the blog reported that The Onion is "in negotiations to sell to a large media company." Gawker said the source did not know how far the negotiations had progressed.

In recent months, The Onion has appeared to suffer the same advertising and high print-cost troubles as "real" news publications. The Onion's leaders just oversaw broad cost cutting that included discontinuing the printing of editions in San Francisco and Los Angeles as well as laying off editors in those areas.

Some top managers have also left, including Sean Mills, the publication's former president.

New Google sales head Nikesh Arora restructured his group this week.

(Credit: Google)

The new sheriff in charge of Google's sales organization has made a few changes to the lineup.

The Wall Street Journal reported that new Google sales head Nikesh Arora has moved a few executives around, and shown a few others the door, as part of a restructuring in Google's direct sales organization about a month after his elevation to the top sales spot within Google. The report said the changes involve a "small number" of cuts as well as a realignment of how Google deploys its sales force.

A Google representative confirmed that the company created a new position for Penry Price, giving him responsibility for Google's relationships with the big marketing and advertising agencies that handle key corporate accounts. Google also eliminated a geographically based sales structure in favor of one based on particular industries.

The moves all come following the departure of Tim Armstrong from Google to run AOL in March, as well as about 200 layoffs in the sales and marketing group that month.

I haven't bought a DVD in more than a year. Since getting a PlayStation 3--which plays Blu-ray Discs--I just find it difficult to justify paying a slightly lower price (for a DVD) for a noticeably lower quality picture.

It wasn't always that way. There was a time when I didn't understand the appeal of Blu-ray. Now, it's difficult for me to even watch a standard DVD. Even the "Lord of the Rings" trilogy--which was the holy grail for me for DVD picture quality only a few years back--disappoints me to watch.

Sony's BDP-S360 can be found for less than $300.

(Credit: CNET)

It appears I'm not alone. According to a report released Wednesday by market research firm The NPD Group, first-quarter 2009 sales of stand-alone Blu-ray players (read: not including the PS3) in the U.S. surpassed 400,000 units, an increase of 72 percent over the first quarter of 2008. Dollar sales increased 14 percent, to reach $107.2 million.

"The rising penetration of high-definition televisions and lower Blu-ray player prices are broadening the format's market opportunity," said Ross Rubin, director of industry analysis at NPD.

Sounds likely to me, especially in the current economy.

NPD's Blu-ray Report also revealed that purchase intent for Blu-ray set-top boxes rose slightly, with 6 percent of respondents saying they would be "extremely or very likely" to buy such a device in the next six months, compared with 5 percent who responded similarly in the August 2008 report. Honestly, that barely qualifies as an increase. Still, according to the report, 58 percent of adults continue to report that they were still "not very familiar" with BD.

NPD also reports that the average selling price for a stand-alone BD player fell nearly 34 percent--from $393 dollars in the first quarter of 2008 to $261 in the first quarter of 2009, and that consumers who claim that they are likely to buy in the next six months expect to pay $214 on average.

The data for NPD's report was collected via an online survey of 6,994 consumers between February 25 and March 6.

The Lord of the Rings Trilogy is one of the big Blu-ray releases slated for later this year.

Blu-ray detractors and backers, here's the latest status report on the format:

According to Adams Media Research, about 9 million Blu-ray discs sold in the U.S. from January through March--up from 4.8 million units sold in the first quarter of last year.

As Bill Hunt over at The Digital Bits says, those numbers are particularly good considering the ongoing recession and the relatively weak title slate early in the year. He adds that the overall rollout for the format is slightly behind DVD "due to the recession," but ahead of VHS.

Adams is also reporting that there are 10.5 million Blu-ray "households." That figure includes both standalone Blu-ray players and Blu-ray-enabled PlayStation 3s.

Here's what I think: With cheaper Blu-ray players on the way and a better slate of Blu-ray discs on tap for later this year, the format's future appears relatively bright. But detractors will surely point to the high price of Blu-ray discs, as well as improvements in digital downloads and streaming services as continued stumbling blocks.

Comments? Is Blu-ray in good shape or doomed to fail?

(Source: Video Business via The Digital Bits)

E-commerce giant Amazon.com plans to close three facilities, as the company rejiggers its distribution network, according to an Associated Press report Thursday.

Distribution facilities in Munster, Ind., Red Rock, Nev., and Chambersburg, Pa., will be shuttered, with the 210 affected employees offered a chance to either transfer to nearby facilities, or terminate their Amazon employment and receive eight weeks of severance, according to the report.

Representatives from Amazon.com were not immediately available for comment.

Amazon opened the Munster facility in late 2007, but with its closure, it will have two distribution centers in Indiana. The closure of the Red Rock facility, opened in 2001, will leave it with one center in Nevada. And the closure of the Chambersburg site, opened in 2003, will result in Amazon operating three sites in Pennsylvania, according to the report.

The Kindle 2 could generate revenue of $305 million and gross profit of up to $70 million for Amazon this year, according to estimates made by investment bank Collins Stewart.

The estimates are just the latest heady Wall Street predictions for the Kindle 2, Amazon's digital book reader. Last month, a Citigroup analyst published a report that predicted the Kindle 2 would generate $1.2 billion in revenue by 2010.

Amazon hasn't broken out financial numbers for the Kindle 2, which made its debut last month.

Collins Stewart estimates that the device will see sales of $1.6 billion and $400 million in gross profit by the 2012.

"Kindle not only removes multiple costs and inefficiencies from the current value-chain for books (print & fulfillment cost, backorder risk, and inventory management)," the bank wrote, "but also increases propensity to buy more books/content and other adjacent products."

Collins Stewart also compared the Kindle 2 to the Sony eBook Reader in 13 different parameters and concluded: "Except for (the) touch-screen and built-in reading light offered by Sony, the Kindle is a much better device. More importantly, due to Amazon's focus/expertise in books/content, Kindle provides not only the largest repository of eBooks/content but also dozens of user-friendly features/functionality."

(Credit: AVSForum.com)

I just noticed a New York Times blog post about the sales trends of DVD and Blu-ray discs. While numbers for DVD and Blu-ray weren't broken out, overall sales for discs were down big in the fourth quarter of 2008.

Here's the key quote from the article:

In last year's fourth quarter, usually a big one for DVD sales...the studios' revenue from sell-through of conventional DVDs and Blu-ray discs fell 23.4 percent, to $2.6 billion from $3.4 billion. This drop of $800 million, Adams Research figures, shaved fully $500 million from the studios' operating profit because they have normally had a very high, 60 percent profit margin on sell-through revenue.

None of this is all that surprising, of course. First of all, the economy sucks, so people are trying to save more. Second, consumers are gradually transitioning from DVD to Blu-ray--or at least considering it--so there's less incentive to continue building that DVD collection. Put it all together, and you have people doing the smart thing: renting, not buying.

Unfortunately for studios, the trend toward renting vs. buying DVD and Blu-ray discs is probably only going to get more pronounced in the coming months--and maybe even years--especially when you consider the high cost of Blu-ray Discs.

As always, feel free to comment about your own personal situation.