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Battery-hungry cars roll over Lenovo's FY 16/17 bottom line

Data centre unit 'still under transformation' and losing money, as is mobile business

Lenovo has returned to growth, posting a pleasing set of fourth quarter numbers, but apparently has plenty of work to do in the mobile and data centre markets.

The table below, taken from the firm's end of FY16/17 earnings presentation (PDF) illustrates the company's status neatly: the PC, mobile device and data centre businesses all went backwards and the latter two made losses. The result was a US$535m profit, on revenue down four per cent year-over-year.

Lenovo FY 16/17 financial summary

Lenovo's last two financial years. Click here to enlarge into a new window

Chairman and CEO Yang Yuanqing described Lenovo's data centre business as “showing some signs of stabilization” after new leadership was put in place and a restructure. The CEO said the unit continues to “build core competence in software-defined data centre and hyperscale” and has re-tooled its sales team.

But the presentation had little good to say about the unit other than a consultant's report that says Lenovo servers experience less unplanned downtime than rivals'. Executives said customers are, however, willing to look at the company as a legacy-free data centre alternative.

The company's data centre strategy will also see it keep running its own cloud, in contrast to rivals whom Lenovo says effectively go into competition with their clients.

The data centre unit is doing best outside China, a trait it shares with the company's mobile business. A “repositioning” of the company's mobile devices in its home market is under way.

Supply chain problems are biting the mobile business and President and CEO Gianfranco Lanci told Reuters part of the problem is that cars are consuming more batteries and making them hard to come by. Solid-state drives are also becoming expensive and impacting the price of devices, which as the company said contributed to slow Q4 sales in both the PC and data centre units in North America.

Lenovo FY 16/17 Q4 financial summary

Lenovo's Q4 2017. Click here to enlarge into a new window

The PC business had a mixed year. On the one had shipments slipped by 1 per cent to 55.7 million, but the rest of the market fell 3 per cent. The company also lifted its market share by 0.4 per cent 21.4 per cent for the fiscal year. Lenovo an HP Inc have been neck and neck at the top of the PC sales charts for several quarters. Executives explained that it now plans to build a “personal cloud” that adds value to its PCs by allowing personalisation of the devices.

Markets initially reacted well to the results with a couple of per cent bump to the company's share price, but it has since settled to the same levels it enjoyed at the start of the week. ®


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