Lenovo loses its Infrastructure Solutions Group boss

The long and largely unsuccessful effort to turn IBM's x86 server business into consistent profit continues

Lenovo has announced the departure of Kirk Skaugen, the head of its Infrastructure Solutions Group (ISG) – the enterprise tech arm of the Chinese hardware giant.

According to a press statement, Skaugen appears to have left the building already, as Gregg Huff and Vlad Rozanovich – senior veeps in the ISG unit – will jointly lead the business on an interim basis, effective immediately.

No reason has been offered for Skaugen's departure, but Lenovo's full year results for FY24 saw ISG report a nine percent retreat in revenue to $8.9 billion and a $248 million loss. The business unit made a $93 million profit in the previous year.

The foundation of the ISG is the IBM x86 server business that Lenovo acquired in 2014 – a move the PC builder hoped would propel it from its existing desktop business into more lucrative datacenter sales.

The plan didn't work and in 2017 the biz admitted to The Register that it gave the job of selling servers to the same team it used to push PCs – assuming that relationships built on desktop and laptop sales would naturally translate to servers.

That mistake saw Lenovo win less revenue from servers than IBM had done, with largely the same product range.

Lenovo has since chopped and changed its structure, and renamed the business unit now known as ISG, added products to its range, created an IT-as-a-service offering, a business servicing hyperscalers, and a credible supercomputing practice.

Those efforts finally yielded a quarter of profit in 2022, before ISG strung together four profitable quarters across 2022 and 2023.

Lenovo blamed the return to red ink during FY2024 on "the shift in global IT budgets, resulting in a strategic global movement towards embracing AI deployment."

That shift, according to Lenovo's results announcement, caused "disparities in infrastructure investment, leading to a shortage in AI GPU supply, while spending weakened on non-AI equipment, including general compute servers where ISG has its fair share of exposure."

Execs told investors AI will help to improve ISG's fortunes – revealing that AI products "began to contribute positively to its growth trajectory towards the second half of the year."

Indeed, the year's final quarter saw ISG revenue grow 15 percent year-on-year – a record for the business unit. But the $2.5 billion of revenue for the quarter came with a $96.5 million loss – a slump from $7.5 million of profit from $330 million less revenue a year back.

Rival SuperMicro, by contrast, has won $9.6 billion of revenue in the first three quarters of its FY 2024, almost doubling revenue from the same period last year while posting fat profits.

Maybe that's why ISG is looking for new leadership: having reached profitability after years of struggle, returning to the red is surely galling – especially as rivals are growing.

At least Lenovo is not alone among enterprise hardware vendors in having gone backwards. Dell's full-year revenue dropped 14 percent year-on-year but still landed at just over $88 billion and produced almost $4 billion of net income.

At $9 billion revenue and with marginal profitability, Lenovo's ISG is clearly not in brilliant shape. Whoever gets the job of leading it has quite a task before them. ®

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