The company's PC shipments to the mainland, which contributed 48 percent to its total revenue, rose 15 percent in the quarter, boosting its worldwide PC market share to a record high of 8.6 percent, Lenovo said. Its shipments to mature markets, however, declined 17 percent on sluggish corporate demand.

Yang Yuanqing, Lenovo's chief executive, said the company's lead position in China's growing PC market and expansion into the customer and emerging markets has helped improve performance in the quarter.

"If the impact of taxation is excluded, we have already stopped losing money in the quarter," said Yang yesterday. But he declined to predict when the company would turn profitable.

Lenovo's revenue fell 18 percent to $3.46 billion from $4.21 billion during the first quarter of 2008. The world's fourth largest PC vendor reported a net loss of $16.01 million for the three months ended June, compared with a net profit of $110.5 million a year earlier.

Lenovo has recorded a net loss of $264 million in its fiscal fourth quarter ended March, following a $96.7 million loss in the previous quarter.

Yang said he was still conservative about global PC market prospects during the second half of the year. He said the launch of Windows 7, the latest version of Microsoft's operating system, later in the year would come as a shot in the arm for PC makers worldwide.

Yang said the Chinese government's rural PC program, in which the government subsidizes rural buyers, contributed "an insignificant part" to the company's revenue during the quarter. However, "China's rural areas will one day create a market that is bigger than the country's overall PC market today," he said.

China's rural PC program has spurred sales of 110,000 new computers during the past three months, in which Lenovo took up 44 percent, according to figures from the government.

Shipments of Lenovo's notebooks grew by 21 percent in the quarter, while its revenue declined by 9 percent.