HONG KONG: The world's No. 4 PC brand Lenovo reported a smaller-than-expected first-quarter loss on Thursday, boosting hopes that the sector is experiencing a rebound.

Lenovo posted a net loss of $16.01 million in the April-June quarter, its third straight quarterly shortfall but better than market expectations for a $54 million loss.

Analysts say Lenovo has been worse hit than rivals such as Acer andHP during the downturn because of its reliance on corporate spending, stemming from its purchase of IBM's laptop PC arm in 2004.

Optimism that the company will be able to bank on its leadership position in China to ride out the current downturn has pushed its shares are up more than 80 per cent this year, compared to a 40 per cent advance on the benchmark Hang Seng index .HSI.

The company has been one of the biggest beneficiaries of China's move to encourage consumer spending, with almost half of all computers sold under a rural subsidy programme carrying its brand name.

China continued to drive much of Lenovo's growth, accounting for about 48 per cent of its revenue and led with a 14 per cent growth in sales, as the company turned its focus back to its traditional strongholds of China and other emerging markets.

Nearly half of all computers sold under a rural subsidy program in China in the first six months of this year carried its brand name.

Lenovo remained cautious on its outlook and retained its forecast of returning to profitability in the third quarter ending in December.

"As the global economy remains uncertain, enterprise customers are still conservative about PC spending," the company said in a statement.

Lenovo's overall revenue fell 17 per cent in the first quarter from a year ago as companies froze technology spending, and further hit by rapidly declining prices due to the growing popularity of low-cost netbook PCs.