Lenovo Annual Revenue Exceeds 350 Billion Service Transformation Sprint Core Of New Infrastructure

Sino US trade friction, CPU spare parts supply shortage, exchange rate fluctuations, new crown pneumonia outbreak. For Lenovo, the past financial year just passed pneumonia, the external environment is turbulent, and even described by "sinister".

But Lenovo still handed in a transcript that was much higher than market expectations.

In May 20th, Lenovo released its 19/20 fiscal year ending March 31, 2020 and the fourth quarter. Financial reports show that Lenovo's total annual revenue is 353 billion 100 million yuan, unchanged from the previous fiscal year, but at the highest level in history. Pre tax profit was 7 billion 90 million yuan, an increase of 19% over the previous year, and net profit of 4 billion 630 million yuan, up nearly 12% over the same period last year.

Specifically, Lenovo's three main business profits were improved in the last fiscal year. Among them, the pre tax profit of personal computers and intelligent equipment business increased by 18% year to year, reaching 16 billion 300 million yuan, and the loss of mobile business narrowed to 300 million yuan, a sharp decrease of 671 million yuan compared with the same period last year.

"Last year, we basically faced different situations every quarter, from the Sino US trade friction to the operation and deployment, to the shortage of Intel CPU, followed by exchange rate fluctuations, and finally the new crown pneumonia epidemic." In May 20th, Yang Yuanqing, chairman and CEO of Lenovo Group, can not help but feel that when interpreting the earnings report to the media including the twenty-first Century economic report.

In his view, in such a situation, Lenovo's revenue was flat with the previous fiscal year, and its profits improved substantially and the innovation was high. Looking ahead this year, Yang Yuanqing believes that although uncertainty still exists, there are still quite new opportunities for Lenovo.

Counter trend growth

The whole year's revenue has exceeded 350 billion yuan for two consecutive years, and the profit before tax is high and two digit growth year by year. Behind this report card, PC business is still a worthy hero.

The report shows that Lenovo's personal computer and intelligent equipment business group (PCSD) revenue grew 3.6% to 277 billion 500 million yuan over the same period last year, and the pre tax profit increased by 18.3% to 16 billion 300 million yuan, and the pre tax profit margin was 5.9%, both of which reached a record high. PC market share ranked first in the world, reaching 24.5%. The pre tax profits in the fourth quarter increased by 15% over the same period last year, reaching 3 billion 670 million yuan, and the pre tax profit margin was 6.2%, an increase of 1 percentage points over the same period last year.

Among them, the performance of the Chinese region is also quite bright. According to the latest IDC data, Lenovo's domestic PC market share increased by 1.4 and 0.7 percentage points in the fourth quarter and last fiscal year respectively, and the market share reached a record high of 39.3%.

"This is because we have invested in relatively high growth areas for a long time, such as workstations, lightweight books, game computers, and so on. The electricity business also grew faster last year, so driving profit improvement. Yang Yuanqing pointed out that "in addition, we also benefit from the decline in the price of spare parts."

In addition to PC business, Lenovo Mobile business is also continuously enhancing its profitability. During the fiscal year, Lenovo Mobile Business Group (MBG) had a total revenue of 36 billion 300 million yuan and narrowed its losses to 300 million yuan, a 671 million yuan decrease over the previous financial year.

However, due to the central location of Lenovo's global mobile factory in Wuhan, the production rhythm of Lenovo Mobile business has been affected in the past fiscal season, so that in the first three quarters of the total profit, it failed to achieve annual profit targets.

"The production plant of mobile business is affected by the epidemic and is basically in a state of shutdown. In the middle of last quarter, the Wuhan plant basically did not produce." Yang Yuanqing explained, "but we are not only a factory in Wuhan, but also have corresponding factories in India and Brazil. These factories provide 6 million mobile phones for overtime work all over the world."

At the same time, Yang Yuanqing stressed that the impact of the epidemic on Lenovo is not the impact of demand, but the impact of supply. At present, all the factories in Lenovo in China have achieved full recovery, and the Wuhan plant has also achieved full production in early April.

And the new demand point brought by the epidemic is an opportunity for Lenovo.

"Now, the impact of the epidemic on our industry may be lower than that of other industries." Yang Yuanqing judged, "it is mainly because the demand for home office, online learning / games is growing rapidly. Especially in mature markets abroad, growth is even faster. These undoubtedly drive the demand for computers, tablet computers and monitors to rise.

Liu Jun, President of Lenovo China, also pointed out that the domestic PC market has seen a good momentum after the outbreak. Lenovo's domestic PC revenue in April increased by 111% compared with the same period last year. Under such a large market share, there is such a high growth that we can see the strong demand in the whole market. So we are optimistic about the market performance this year.

Service transformation

In addition to the "hard" smart device business, Lenovo is also continuously strengthening its "soft power".

According to the financial report, 19/20 has been affected by factors such as the slow demand of customers in super large data centers and the sharp reduction of key components in the whole fiscal year of 19/20. The DCG revenue is 38 billion 300 million yuan. However, private cloud and traditional data center business revenue was 25 billion 760 million yuan, an increase of 5.3% over the same period, and has achieved three consecutive quarters of year-on-year growth, of which China's business turnover increased by nearly 23%, and server sales increased by more than 14%.

In addition, value-added services continued to grow, of which the software defined infrastructure SDI grew by 27.4%, storage business grew by 54.4%, software business grew by 42%, and software and services grew by 10%.

Lenovo's independent operation of DCG China (Lenovo Enterprise Technology Group) has also made progress in its business, with a year-on-year revenue growth of 4% over the same period, and fourth quarter revenue growth of 3% over the same period. The value-added business, including storage, software definition infrastructure, solutions and services, grew by 30% over the same period last year.

In fact, in Yang Yuanqing's view, in order to meet the needs of home learning and home office, the demand for infrastructure such as cloud computing, servers, storage and so on has also increased significantly.

At the same time, Yang Yuanqing also stressed the importance of service to the intelligent transformation of Lenovo. "Service is a starting point. Without service, intelligent transformation will not go anywhere, and it will not get to customers." Yang Yuanqing explained so.

Prior to Lenovo Group's new fiscal year pledge conference, Liu Jun revealed that in the last fiscal year, the growth rate of non PC business in Lenovo was 50%, of which the annual revenue of intelligent service business exceeded 5 billion yuan, an increase of 34% over the previous year. In the latest fiscal year, the revenue target of Lenovo's smart service business was set at 7 billion yuan, in other words, the planned growth of 40%.

"Our service oriented transformation is divided into three levels." Yang Yuanqing explained that the first layer is Lenovo's more mature hardware additional services, including services for customers who buy Lenovo products to provide 4 hour response, 24 hours to solve problems and other services; the second level is the operation and maintenance services for enterprise customers, including the worry free service of the front desk terminals, the support for the data center and cloud services in the background, and the further introduction of the equipment. Device (ASA Service) and even data center as a service.

The third level is the solution, namely service. "We will provide solutions for the digitalization and intellectualization of all walks of life." Yang Yuanqing explained that "the solution requires a lot of components, including hardware and software. These are not only provided by Lenovo, but also integrated with third party products, and then combined into smart manufacturing solutions, smart retail solutions, smart agriculture solutions, smart medical solutions, etc., to meet the needs of one-stop services for customers.

"Epidemic makes everyone aware of the necessity of digitalization and intellectualization of enterprises, which will drive the development process of digitalization and intellectualization of enterprises." Yang Yuanqing pointed out. Therefore, in his view, Lenovo, which takes service as the starting point and sprints the core providers of new infrastructure, is also facing enormous opportunities. "Lenovo is fully prepared to meet these growth needs, and it is also confident that it will grow faster than the market."