Lenovo seeks new growth areas in a challenging PC market

Enterprise is a bright spot and hybrids are a focus going forward, but efforts to integrate Motorola's mobile portfolio "did not meet expectations", the company said in its fourth-quarter and full-year results.


The PC market remains turbulent, as Lenovo's financial results show.

Image: Lenovo

The world's biggest PC maker Lenovo said it has faced "internal and external challenges" as it published financial results revealing weak PC and smartphone sales.

Reporting its fourth quarter and full-year results, Lenovo said that revenue for the fourth quarter stood at $9.1 billion, down 19 percent year-over-year, while annual revenue was down three percent to $44.9bn. The company reported a full-year net loss of $128m.

Lenovo's PC group, which includes PCs and Windows tablets, saw quarterly sales of $6.2bn and pre-tax income of $312m -- down 20 percent year-over-year. The company shipped 12.1 million PCs in the quarter and said it will "attack new growth areas" such as gaming and "detachables" -- the two-in-one hybrid PC devices that have provided a glimmer of light for PC makers.

The company's mobile business group, including the Motorola acquisition plus Android tablets and smart TVs, saw quarterly sales of $1.7bn and 10.9 million smartphones shipped (66.1 million for the whole year).

Markets outside China saw 63 percent growth with 51 million smartphones shipped, but Lenovo said that its mobile business in China declined by 85 percent "because the shift from a carrier-focused to open market focused business model -- where higher average sales prices prevail -- was too slow."

Although Lenovo shipped 11 million tablets, with Motorola accounting for nearly five million smartphones and $1bn in revenue, the company said: "These results show integration efforts did not meet expectations."

Lenovo said it had "learned a great deal" since the close of the Motorola acquisition, and plans to use its ZUK brand to rebuild in China and build a "competitive product portfolio" to get its US business "back on track".

Lenovo's enterprise business group -- which includes servers, storage, software and services sold under both the Lenovo ThinkServer brand and the System x business unit -- was a bright spot, with full-year sales of $4.6bn, up 73 percent, driven by hyperscale computing wins in China. However, quarterly revenue fell eight percent to $1bn, which the company blamed on a sales force model "not fully aligned to maximize opportunities."

By geography, China accounted for $2.3bn in revenue in the fourth fiscal quarter, or 26 percent of Lenovo's worldwide revenue, while operating margin grew by 0.1 points year-over-year to 4.5 percent. Lenovo's Asia Pacific region revenue totalled $1.6bn for the fourth quarter, or 17 percent of worldwide revenue: in EMEA, which accounts for 27 percent of worldwide revenue, Lenovo said that revenue was held back by a falling PC market.

The Americas accounts for $2.7bn in revenue, or 30 percent of the worldwide total. The company said its American mobile business had suffered because the launch of the Moto G was delayed until the first quarter.


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