Lenovo Group, the world’s biggest maker of personal computers, reported a deep slump in fourth-quarter profit due to disruptions caused by the coronavirus crisis, although the result was far better than expectations.
Lenovo Chairman Yang Yuanqing said that production is back on track and he expects to see year-on-year revenue growth this quarter for its PC and smart devices business and its data centre business as more people work from home permanently. Lenovo had to shut down factories, including a big plant in Wuhan, the epicentre of China’s outbreak, due to measures to contain the virus. “We have resumed 100% production in China,” Yang said, although he noted that some components were still in short supply.
The company's net profit tumbled 64% in January-March to $43 million and its revenue slid 9.7% to $10.6 billion.
Lenovo’s Intelligent Devices Group (IDG) continues to lead the company’s strong performance. The PC and Smart Devices group (PCSD), one of the two IDG business units, led the way with revenue for the year of almost US$40 billion, up 3.6% year-on-year. Profitability improved, with pre-tax income a record high of US$2.3 billion (more than 18% year-on-year) and an industry leading and record high PTI margin of 5.9%, up 0.7 points year-on-year.
IDG’s second business group, the Mobile Business Group (MBG), was on target for a breakthrough year until the fourth quarter impact of the required closure of the company’s primary smartphone factory in Wuhan due to COVID-19. Overall MBG revenue declined and pre-tax loss was US$43 million, greatly narrowed by US$96 million year-on-year.
The Data Center Group (DCG) saw overall revenue decline 8.7% year-on-year due to softer Hyperscale demand and significant commodity price declines, but non-hyperscale revenue grew 5.3% year-on-year. This was driven by double-digit revenue growth in Software Defined Infrastructure (SDI), Storage, Software and Services. In particular storage revenue grew more than 50% year-on-year. In addition, non-hyperscale server volume grew by 14% and China revenue by 23% year-on-year.
Smart IoT revenue almost quadrupled (+296%) year-on-year driven by augmented and virtual reality, Smart Office and Internet of Things. Smart Infrastructure grew 37% year-on-year as Network Function Virtualization started to generate revenue. And Smart Vertical revenue more than doubled (+133%) thanks to strong growth in Data Intelligence Business Group, smart healthcare and smart education solutions. Software and Services had a breakthrough year with record revenue of US$3.5 billion, up 43.2% year-on-year and becoming the catalyst for the Group’s overall transformation.