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Lenovo moves forward on new strategy

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Lenovo has made good progress in implementing and executing its new “three-wave strategy,” designed to meet the critical business challenges of today, while positioning itself for continued long-term profitable growth.
As part of Lenovo’s transformation, the company put in place an aggressive new end-to-end ownership model to manage each business differently, led by strong new leaders, and is seeing improvements as a result.
“Despite challenging market conditions, Lenovo saw revenue resume to growth in the fourth quarter, after five quarters of decline,” says Yang Yuanqing, Lenovo chairman and CEO,, announcing the company’s results for the year ended 31 March 2017.
“To drive further growth, we have clearly defined the three-wave strategy. We will maintain PC leadership in scale, profitability and innovation in the first wave, while building our second wave, mobile and data center businesses into growth engines. Simultaneously, we will execute our third wave of “Device + Cloud” and “Infrastructure + Cloud” to capture the opportunities brought by new technologies. With this new strategy, we are confident to achieve long term, sustainable growth.”
For the fourth fiscal quarter, Lenovo’s revenue was $9,6-billion, an increase of 4,9% year-over-year, fueled in part by a good performance in the PC/smart devices and mobile businesses. For the full-year, Lenovo’s revenue was $43-billion, down 4,2% year-over year.
The company’s gross profit for the fourth fiscal quarter decreased 9,8% year-over-year to $1,4 billion, while for the full year, gross profit fell 7,8% to US$6.1 billion. Operating profit for the fourth fiscal quarter was $74-million. For the full year, Lenovo’s operating profit was $672-million. Fourth-quarter net income was $107-million, while net income for the full year was $535-million, an increase of $660-million year-over-year.
Basic earnings per share in the fourth fiscal quarter was 0.97 US cents or 7.56 HK cents, and for the full year basic earnings per share was 4.86 US cents or 37.71 HK cents. Lenovo’s board declared a dividend of 2.63 US cents, or 20.5 HK cents per share for the fiscal year ended March 31, 2017.
The PC and Smart Devices (PCSD) business group, which includes PCs, tablets and smart devices, Lenovo’s quarterly sales were up 4,9% year-over-year to $6,7-billion. Quarterly shipments grew 1% to 14,4-million, four points better than the overall market. Pre-tax income for the quarter was $288-million, a decrease of 4,7% year-over-year.
For the full year ended 31 March 2017, Lenovo’s PCSD sales were down 2,3% but beating the overall market, at $30-billion. Shipments for the year beat the market significantly by 7.1 points, with 66,6-million, while pre-tax income margin stood at 5%, a slight increase year-over-year.
Lenovo continued to deliver strong results in both the fourth quarter and full year in the hyper-growth categories in this business, such as gaming, detachables, Chromebooks and Millennial PCs (in China). For example, gaming and Chromebook shipments were up 20,5% and 38,2% respectively in the fourth quarter. Meanwhile, detachables grew at a double digit premium compared to the market, and Millennial PC continued its rapid rise in China with triple digit growth for the fourth quarter in a row.
Lenovo’s Mobile Business Group (MBG), which includes Moto and Lenovo-branded smartphones, saw 19,7% revenue growth in the fourth fiscal quarter outside of China,
with total sales of $1,7-billion. Fourth quarter smartphone shipments increased 17,4% to 11,3-million units outside China, beating the market significantly by 12.8 points.
For the full year, overall sales were down 5,4% and pre-tax income margin decreased 1.9 points outside China.
In Asia Pacific and Latin America, led by our success in India and Brazil respectively, Lenovo’s mobile business continued to improve throughout the year. In Western Europe, shipments were up in France, Germany and the UK, while in North America, our channel expansion plans are on track.
In China, Lenovo added new leadership, re-aligned our strategy and product portfolio, and cleared our inventory as we get ready to introduce a new product lineup.
In the Data Center Group (DCG), which includes servers, storage, software and services, fourth fiscal quarter sales were down 13,7% year-over-year, to $850-million. For the full year, revenue decreased 10,6% on total sales of $4,1-billion.