By TOM ORLIK And PAUL MOZUR

Lenovo Group Ltd. has turned a profit from selling smartphones in China and is seeing strong growth in other emerging markets, a company executive said Wednesday.

The Chinese personal-computer maker saw sales of its smartphones in China surge over the past year, but few expected the smartphone business to become profitable so quickly. In a November earnings call, Chief Executive Yang Yuanqing said it would take two to three quarters before it would turn a profit from its China smartphone operations, in part due to investments in marketing and building sales channels.

But Chief Financial Officer Wong Wai Ming said Wednesday in an interview on the sidelines of the World Economic Forum in Davos that the company is already making money in what has become the world's largest smartphone market.

In China, Lenovo's market share jumped to second place with 15% in the third quarter of 2012 from just 1.7% a year earlier, according to Gartner. The research firm predicts that Lenovo will become the No. 1 smartphone vendor in China this year to top Samsung Electronics Co.

Despite Lenovo's quick rise, analysts have warned that fiercecompetition based on price in the smartphone market means that Lenovo is unlikely to see big margin expansion. According to CLSA, the price of entry-level phones in China has dropped 40% to 50% over the past year, while many continue to boast better technical features, like large screens and faster processors.

Others have warned that it can be a challenge to sell more profitable higher-end phones for a company that begins by selling lower-priced ones.

But Lenovo, which has continued to turn profits in the personal computer market, has ambitiously expanded its smartphone operations beyond China. Its smartphone sales are growing strongly in other emerging markets like India, Indonesia, Vietnam and Russia where they launched recently, Mr. Wong said.

'Just a couple of months in, the numbers are good, but from a very low base,' he said, without providing specific figures.

Mr. Wong said Lenovo's strong position in China made it easier to enter other markets.

'We go into China, get enough volume to make money, then go into other markets,' he said. Lenovo's position as a leading seller of PCs in those markets also meant brand recognition and distribution networks were in place.

The company's push into devices that offer tablet and notebook functionality combined, is yielding higher margins than the traditional PC business.

Mr. Wong also said the company is looking at 'inorganic' acquisition opportunities across a range of product lines noting the cheap cost of financing on the world markets.

He said the company could issue corporate bonds at an interest rate of 3% to 4% as a means of 'validating' Lenovo's presence in the world of global finance. 'There are many areas we will consider, but as a finance person, an acquisition has to make sense for shareholders.'

Mr. Wong said the economic outlook in China has improved, but the age of rapid growth in China PC sales was unlikely to return.