Recently, Lenovo Group issued its fiscal first-quarter earnings report for the 2017/18 financial year ending June 30, 2017. The financial results showed a net loss of $72 million for the quarter, marking the first loss in six quarters, while analysts had predicted a net profit of $32.9 million.
According to the report, for the three months ended June 30, Lenovo's consolidated revenue fell 0.4% year-over-year to $10.12 billion, with gross profit declining 11% year-over-year to $1.365 billion.
In terms of business segments, Lenovo's PC and smart device business saw revenue rise by 0.2% year-over-year to $7.05 billion. Mobile business revenue increased 2% year-over-year to $1.746 billion. Data center business revenue dropped 11% year-over-year to $971 million, while other goods and services brought in $290 million. Due to these figures, as of 11:08 on August 18, Lenovo shares fell 3.39% to HK$4.56.
Just last month, Yang Yuanqing stated at a press conference that increasing online sales would help boost Lenovo's annual revenue by $12 billion within three years, or else he would step down from his CEO position. He expressed confidence in their ability to achieve this goal and urged shareholders to be patient.
However, Lenovo has faced challenges beyond just financials. The PC industry has seen thin margins, and Lenovo's mobile phone division has struggled domestically in China, falling significantly in sales compared to previous years.
Lenovo's PC and tablet business remains crucial, contributing roughly 70% of total revenue. Despite a drop in unit sales due to part shortages and rising costs, revenues stayed steady at $7.05 billion. Profit, however, fell 21% year-over-year to $291 million.
To bolster its PC presence, Lenovo brought back Liu Jun, previously in charge of mobile phones, to lead the Chinese PC business. Additionally, Lenovo is collaborating with JD.com to aim for annual online sales revenue of 80 billion yuan within three years.
In the mobile phone segment, Lenovo's Motorola brand continues to face hurdles, representing 17% of total revenue. Although mobile business revenue rose 2% year-over-year to $1.746 billion, pre-tax operating profit margins improved by 2.2 percentage points year-over-year. Excluding non-cash expenses related to mergers and acquisitions, the pre-tax operation still incurred a loss of $129 million.
The data center business also faced setbacks, with revenue dropping 11% year-over-year to $971 million. Lenovo executives attributed this to excessive integration of PC and server businesses, impacting sales of the x86 server business acquired from IBM.
Yang Yuanqing emphasized that despite short-term losses, Lenovo's focus on transformation is essential for long-term sustainability in the age of artificial intelligence. He mentioned investing $1.2 billion over the next three years to ensure success in infrastructure and cloud services.
Under Yang Yuanqing's leadership, Lenovo has grown into an international giant with operations spanning over 160 countries. However, challenges remain, especially in China where the mobile business has fallen behind competitors like Huawei and Xiaomi.
Despite these obstacles, Yang Yuanqing remains determined, viewing Lenovo as a pioneer in the internet and mobile internet industries. His strict management style, though respected by younger employees, has led to some high-profile changes within the company, including replacing executives when progress was deemed insufficient.
For Lenovo, Yang Yuanqing remains both a respected leader and a symbol of resilience in the ever-changing tech landscape.
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