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Lenovo starting to see results of transformation strategy

Vendor is continuing with a shift towards emerging technology areas that will secure future growth for the business

Lenovo has managed to maintain its dominance of the PC market and share some cheer about its financial performance, with the vendor announcing numbers for its fiscal year.

The vendor embarked on an “intelligent transformation” strategy a couple of years ago, as it looked to exploit the arrival of 5G and the growth of the internet of things (IoT) and artificial intelligence (AI). The crux of the approach is to offer IoT, infrastructure and vertical offerings that will appeal to customers.

That plan has carried on despite the current upheaval caused by the Covid-19 coronavirus, and numbers for the year to 31 March were welcomed by Yang Yuanqing, Lenovo chairman and CEO.

Group revenue dropped by 1% but still broke the $50bn barrier for the second consecutive year, while pre-tax profit improved by 19%, coming in at US$1.02bn.

“Amid one of the most significant periods of global change and transformation we have ever seen, Lenovo significantly transformed its business over the past year. From achieving record PTI of US$1.02bn to reaching near record revenue of US$50.7bn, I could not be prouder of our strong performance,” said Yuanqing.

Lenovo’s channel has been focused in the past year on the small to medium-sized enterprise (SME) market, particularly the mid-sized customer base, and the vendor kept its PC sales going but saw a dip on the storage side.

The PC and smart device business managed to deliver an 18% climb in pre-tax profit to $2.3bn, with the vendor gaining the rewards of a decision to concentrate on high-value segments – workstation, thin and light, visual and gaming PCs.

“Amid one of the most significant periods of global change and transformation we have ever seen, Lenovo significantly transformed its business over the past year. I could not be prouder of our strong performance”
Yang Yuanqing, Lenovo

The datacentre group had a slightly tougher time, with revenue declining by 8.7%, although losses slightly improved to $226m. Efforts are being made to invest in areas that will turn the situation around, including storage, software-defined infrastructure, software and services.

There are signs that the vendor is stepping up efforts to incentivise partners to sell datacentre solutions into new and competitive accounts, with a scheme being kicked off by the channel leadership team on the other side of the Atlantic.

The impact of Lenovo’s transformation strategy appeared in the numbers, with software and services growing by 43% year on year, now accounting for close to 7% of the firm’s overall revenue. Smart IoT and smart vertical businesses posted triple-digit growth over the course of the fiscal year.

The CEO said it had weathered the storm so far and was well positioned to come out of the coronavirus pandemic maintaining its current strategy.

“I am unbelievably proud of how we continue to respond to the global pandemic, as both a business and a corporate citizen,” he said. “While the world continues to face uncertain times, I’m confident Lenovo will leverage its operational excellence and global footprint to continue implementing our intelligent transformation strategy and fully grasp the opportunities our ‘new norm’ provides us.”

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