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After years of losses, Lenovo's infrastructure group posts 12 months of profits

Execs say enterprise hardware biz is flying – don't mention the sub-one-percent profit

In February 2022 Lenovo shared a slightly special number: $17 million. That's the first profit made by its Infrastructure Solutions Group (ISG) since its predecessor was formed by the 2014 acquisition of IBM's x86 server business.

Yesterday Lenovo revealed another important number: four. That's the number of quarters in which ISG has turned a profit.

A whole year of black ink is a nice turnaround, except for one little problem: the ISG makes only the merest sliver of profit.

The Register has done the sums, and across those four profitable quarters ISG won $8 billion of revenue and earned $71 million in profits.

Here's the numbers from the year of profit, with amounts in millions of dollars:

  Revenue $ Profit % Profit
Q3 22 $1,928 $16.9 0.9%
Q4 22 $1,408 $6.8 0.5%
Q1 23 $2,086 $11.3 0.5%
Q2 23 $2,614 $36.0 1.4%
Avge profit
$8,036 $70.9 0.8%

Lenovo's ISG profits aren't enormously worse than the two companies it is chasing in the enterprise hardware market: HPE and Dell. Each company groups different products under its enterprise numbers, so direct comparisons are hard.

But where Lenovo stands out is in its small size. Dell's enterprise hardware business is a $9.5 billion per quarter outfit, while HPE wins around $6 billion a quarter.

Lenovo points to having recently expanded its range of enterprise hardware very considerably as one reason it can turn the last year's black ink into long-term success.

Yesterday's Q3 results announcement saw ISG president Kirk Skaugen explain Lenovo's plan.

"We had records in Cloud, all-time records, as well as a Q2 record in Enterprise and Small and Medium Business," he told investors, adding that the group also posted "records in traditional NAS and SAN markets and hyper converge and in cloud-based storage."

"It was broad-based from a geography perspective with all-time records in Europe, Asia, Pacific, and Americas."

But while execs from Lenovo's PC-centric Intelligent Devices Group and consultancy-led Solutions & Services Group (SSG) both spoke of working to defend and improve margins, Skaugen did not.

ISG therefore looks a long way from its worst days – when Lenovo flamed out by using its PC salesforce to shift servers. But it remains to be seen how it runs a low-profit business while facing larger and deeper-pocketed rivals, even as cloud continues to offer buyers all manner of alternatives to on-prem hardware. ®

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