Lenovo presented the financial results for the 2nd quarter of financial year 2017/2018
- Revenue was $11.8 billion, an increase of 5% compared to the same period of the previous year and 18% compared to the previous quarter
- The company’s income before taxes increased compared to the previous quarter by $104 million to $35 million.
- The market situation remains difficult, but Lenovo is confident of implementing its three-tier strategy and ensure the targets
- Lenovo has completed the procedure of establishing a joint venture with Fujitsu
- Basic earnings per share ? Of 1.26 cents, or Hong Kong cents to 9.85
Lenovo Group (HKSE: 992) (ADR: LNVGY) presented the results for the 2nd quarter of the fiscal year ending September 30, 2017. As a result, the company’s revenue was $11.8 billion, which is 5% higher compared to the same period of the previous year and 18% higher compared to the first quarter of the current fiscal year. Quarterly revenue increase recorded in the three main departments of the company is producing products for data centers, mobile devices and personal computers and smart devices. This confirms the loyalty company implemented a three-tier strategy that provides a gradual improvement in all areas of work Lenovo. The company’s income before taxes increased by $108 million, which represents a significant improvement over the negative figure in the previous quarter.
1 block 2017/2018 Lenovo introduced the widest range of products for data centers in the entire history of its existence. In addition, the company continued formation and development of new distribution models, and has achieved revenue growth outside of China, primarily in Europe and North America. In the division on manufacture of mobile devices, the situation was also favorable. This contributed to good sales of Moto smartphones in key markets – revenue increased compared to the previous year, and the most significant sales growth was recorded in Western Europe, North and Latin America. The unit shows a significant and consistent revenue growth for the third consecutive quarter.
The unit for the production of PC and smart devices has again made a profit in all marketing regions. The company has taken record market share of PC and smart devices in Europe, Middle East and Africa is 21.3%. Other important events were the launch of a new product Star Wars: Jedi Challenges, created in partnership with Disney on the basis of augmented reality technologies, and the celebration of the 25th anniversary of the legendary ThinkPad notebook.
Also today, Lenovo has completed the process of negotiating the terms of the agreement on creation of joint venture with Fujitsu. Manufacturers combine their resources in a common goal: the broad capabilities of Fujitsu in the field of international sales, customer support and manufacturing with a global presence and operations of the company Lenovo in the global market.
Lenovo continues to look for new opportunities to ensure rapid growth and development in its key markets. The newly established joint venture is intended to strengthen the leadership position to Lenovo in the global PC market and to ensure further profit growth.
Ian Wantin, CEO and Chairman of the Board of Directors of the company Lenovo: «In the past quarter, we continued the steps towards the transformation of our business units and implementation of the new three-tiered strategy. We were able to maintain industry-leading profitability in the division on manufacture of PC and demonstrate growth exceeding the market. Continuing the change process unit for the production of products for the data center: we have strengthened the sales Department, implemented a new scheme and programme distribution, and also tried to improve the competitiveness of our new products. There is still a positive change in the unit production of mobile devices in most markets growth significantly exceeded the market average. Effective work and the creation of solid foundations for further growth are still among the strengths of Lenovo. Significant changes for the better in work of the company in Brazil is a vivid example. We will continue to invest in the creation of solid foundations and key competencies for our new engines of growth that are designed to ensure stable sales volume in the long term.»
The company’s gross profit in the second quarter of the fiscal year was $1.6 billion and increased by 0.3% compared to last year and by 18.2% compared with the first quarter. Gross margin for the quarter was 13.7% which represents a slight increase compared to the previous reporting period. Basic earnings per share in the second quarter amounted to 1.26 us cents to 9.85 or Hong Kong cents. The Board of Directors of the company Lenovo has announced the payment of an interim dividend of 6 Hong Kong cents per share.
Overview by departments
In the division on manufacture of personal computers and smart devices recorded a significant increase of quarterly sales by 7% compared to the previous year and 20% compared to the previous quarter to $8.4 billion, the Average price of products in this category increased compared to the same period last year by 6%. This was facilitated by a number of factors, including the great attention paid to finding innovative solutions to the presence in the grocery goods of higher price category, as well as withdrawal from active promotion of the products in the lower price segment.
The operations of the unit for the production of personal computers and smart devices were profitable in all sales regions. It has maintained industry-leading profitability indicators at the level of 4.4%. Lenovo has optimized its product line, which is reflected in the choice of the customers and ensure improvement in division in the reporting period. During the second quarter of the current financial year were shipped 14.5 million personal computers – this indicator has not changed compared to the same period of the previous year. While the overall market experienced a small decline. Sales of tablets grew at an annualized rate of 8.9%. For the second quarter was shipped to 2.97 ml. units. While the overall market saw a decline in the level of 9.4%.
During the reporting period, Lenovo and Disney introduced the product based on augmented reality technologies ? Star Wars: Jedi Challenges. The device received rave reviews from users and fans of the movie who had a unique opportunity to dive into the world presented in the series of cult movies. For immersion necessary to have a smartphone and a set of Jedi Challenges, which includes helmet augmented reality Lenovo Mirage, the motion controller in the form of a lightsaber and a laser beacon to track the location of an object. In addition, in the second quarter, Lenovo celebrated the 25th anniversary of the legendary ThinkPad notebook: for all time of its existence in the market has sold 125 million copies. Laptops this series, and today are popular with buyers, one of the most popular models ? ThinkPad X1 Carbon.
The unit for the production of products for the data center that includes servers, storage, software and services had experienced steady revenue growth on an annual basis, as in the Nordic countries and in Europe, the Middle East and Africa. In North America, in particular, recorded a revenue growth of 10%, helped by investment in the introduction of optimized distribution models, new product line, conducted trainings for the experts of sales departments, as well as new partnerships. Everything is here for the second consecutive quarter sets the tone in the change process unit for the production of products for the data center.
The division’s performance in China grew by 7% compared to the previous quarter. The situation in the region over the past quarters have been challenging, but the company has had several changes, which made it possible to reverse the situation and achieve success in the segment of the hyperscale solutions, big data and private cloud solutions. Among these transformations, a new direction and extension parts of the distribution. The number of global clients of the company increased compared to the same period last year by as much as 18%, and the amount of reserved service have increased over the year by 100%, which lays a good Foundation for the future. Increased significantly in the second quarter and sales of solutions in the field of software-defined infrastructure. In addition, increase the production of products for the data center and contributed to the recent success of the company in the field of high performance computing, as well as the successful implementation of projects with partners – the largest companies and universities.
In the division on manufacture of mobile devices, which includes the production of smartphones under the brands of Moto and Lenovo, there was slight compared to last year and significant compared with the first quarter (19%) growth in sales. This contributed to the success of smartphones the Moto, and overall consistent growth over the last three quarters. During the reporting period, there was significant compared to the same period last year the growth in demand for smartphones series Moto G and Moto E. moreover, the sales of smartphones series Moto Z increased by 18% compared to the previous quarter. The ratio of related sales modules Moto Mods – increased to 37%, an increase of 30% compared with the previous quarter.
The number of sold smartphones of the company increased by 10% compared to the previous year and 37% compared with the previous quarter and amounted to 15.3 million units. This contributed to significant sales growth in Western Europe, Latin America and North America – 71%, 69% and 67%, respectively. In Latin America, the company has taken record market share at 17.7%, which increased compared to the same period last year by 6.5%.
Lenovo continued to implement its strategy aimed at protecting the company’s leading positions on the market in Latin America, and increased its market share and profitability. The company continued active operations in the markets of the developed countries of Western Europe and North America, where it increased its market share by 1.7% yoy. Lenovo has demonstrated steady growth in its key markets of developing countries. In India, for example, the increase was 14% compared to the previous year and 83% compared to the previous quarter.