Yang Yuanqing Interprets Lenovo Group'S Latest Financial Performance And Strong Growth Of Service Business

In the context of the global epidemic, Lenovo has published a good financial report, with some indicators setting new records.

On August 13, Lenovo Group (00992. HK) announced its first quarter results for the fiscal year 20 / 21 as of June 30, 2020. According to the financial report, Lenovo Group's turnover reached 13.348 billion US dollars, up 7% year on year. Pre tax profit reached 332 million US dollars, up 38% year on year. Net profit reached 213 million US dollars, up 31% year on year.

Specifically, the revenue of IDG intelligent equipment business group (including PCSD and MBG) increased by 5.2% year-on-year to US $11.736 billion, a new record in Q1; the profit before tax increased by 17.2% year-on-year to US $620 million. The data center business resumed strong growth in the current quarter, with turnover up 18.9% year-on-year to $1.612 billion, accounting for 12% of the group's total sales.

What needs to be noted is that Lenovo said during the pledge meeting in April this year that it would build its services and solutions into a new core competitiveness in the next decade, and the related businesses also performed well in this quarter. According to the financial report, from the perspective of service dimension, the turnover of equipment added software and services, operation and maintenance services including DAAS and solution services increased significantly by 32%, 48% and 54% year-on-year, which promoted the overall turnover of software and service business to increase by 38% year-on-year, reaching 7.15 billion RMB, accounting for about 7.6% of the group.

"In the service business of Lenovo, the equipment and service (DAAS) related business has made a great breakthrough, and many of the world's top companies have signed large orders with Lenovo, which will not only drive our revenue in the current quarter, but also drive the growth of our annual revenue." In an interview with the 21st century economic reporter, Yang Yuanqing, chairman and CEO of Lenovo Group, said, "at present, Lenovo's service businesses at three levels are growing very fast, and we are quite confident in the continuous growth of this business."

PC is sure to continue to grow

From the latest quarter financial report, PC business is still Lenovo's well deserved performance king.

Lenovo's total revenue of 10.06 billion US dollars and intelligent equipment accounted for 10.03% of the total revenue of the group. Pre tax profit reached $670 million, up 27.9% year on year. Meanwhile, the pre tax profit margin further increased to 6.3% year-on-year, reaching a new record.

Among them, the sales volume of consumer computer business increased by 53%, the market share of personal computers and tablet computers was 18%, the sales volume of light and thin books increased by 70.8%, the sales of game computers increased by 77.8%, the sales of chromebook increased by 16.7%, and the sales of display business increased by 13.3%.

"We are confident that future PC growth is sustainable." Focusing on the development of Lenovo's PC business, Yang Yuanqing judged that "home office and home-based learning is a major trend in the future, and PC is becoming a tool for everyone like a mobile phone. At the same time, in addition to information consumption, PC is also a productivity tool, and it will still have considerable room for growth. "

Yang Yuanqing pointed out that the fast growth of PC business in this round is the mature market. "We see the growth of PC in Japan, the United States, including China. In these areas, PC penetration has been very high, but due to the demand of home study and office work, PC still shows a growth trend."

In terms of mobile business, Lenovo MBG mobile business group's mobile business revenue was US $1.093 billion this quarter, down 27% from the same period last year. Lenovo pointed out that this was due to the dual impact of the epidemic situation and exchange rate fluctuations. However, compared with the first quarter of fiscal year 19 / 20, it had recovered and its turnover increased by 33% month on month, showing a significant improvement momentum.

In addition, the sales volume of Latin America and Europe reached a record high of 19.9%, especially in North America and Europe.

Yang Yuanqing analyzed that due to the impact of demand under the epidemic situation, North America and Latin America, the main battlefield of Lenovo Mobile, showed an industrial decline. As a result, Lenovo Mobile's market share in both regions is the highest in history despite the decline in performance. "In terms of the current quarter, sales in this quarter will be better than those in the previous quarter. We are concerned that mobile phone activation rate has returned to the same period last year after a sharp decline in previous quarters."

Services continue to grow

The data center business resumed strong growth in the current quarter, with turnover up 18.9% year-on-year to $1.612 billion, accounting for 12% of the group's total sales.

Lenovo pointed out that as the new normal of the epidemic has accelerated the transformation of office, education and entertainment to digital, Lenovo accurately grasped the market demand of "cloud service IT infrastructure" driven by the growth of digital network consumption, and the turnover of related businesses increased by more than 30% year-on-year, setting a new record. Thanks to the continuous enhancement of self research and production capacity, the customer scale of DCG business is also expanding.

At the same time, the turnover of "enterprise IT infrastructure" related business increased by 9.2% year-on-year, which was mainly due to the performance improvement of high growth segments, including 31% of software defined infrastructure, 10% of service business and 21% of high-performance computing business.

In terms of business transformation, Lenovo has achieved significant growth in all areas of 3S. The business turnover of smart IOT intelligent Internet of things increased by 39% year-on-year, and that of smart infrastructure business increased by 16% year-on-year. Thanks to the promotion of intelligent solutions business in vertical fields such as smart city in China and smart healthcare in North America, the turnover of intelligent business in smart vertical industry increased by 65% year-on-year.

From the perspective of service dimension, the turnover of equipment added software and services, operation and maintenance services including DAAS and solution services increased significantly by 32%, 48% and 54% year-on-year, which promoted the overall turnover of software and service business to increase by 38% year-on-year, reaching RMB 7.15 billion, accounting for about 7.6% of the whole group, and the profit margin of all products was the highest.

According to Yang Yuanqing, Lenovo is now building a service driven 3S strategic transformation, and is promoting three levels of service business, including services related to hardware equipment, such as maintenance and warranty, which is also the service content that contributes the most to the group at present; the second category is operation and maintenance services and in-depth provision of equipment as a service; the third is solution as a service, It includes the third-party solutions, namely Lenovo's own IP solutions, focusing on manufacturing, education, health care, retail and other aspects.

"In the last quarter, we made a great breakthrough in device as a service. Many of the world's top companies signed large orders with us, including three-year orders. This will not only drive our revenue in the current quarter, but also drive revenue growth throughout the year." "In addition, in terms of solution services, Lenovo's business grew by more than 50% in the latest quarter, which is due to the breakthrough of smart city in China and smart healthcare in North America. At present, all three of our businesses are growing very fast. "