Lenovo points to record earnings on strong PC sales

Lenovo Group on Tuesday (3 November), reported record group revenue in the second quarter of $14.5 billion, up 7% year-on-year and with all businesses showing strong growth.

Profit showed even stronger growth, with record pre-tax income of $470 million, up 52% compared to the same quarter a year earlier, while net income also increased by 53% year-on-year to a record $310 million.

Basic earnings per share for the second quarter were 2.59 US cents or 20.08 HK cents, while the group’s board declared an interim dividend of 6.6 HK cents per share.

“Our record results this quarter reflect our ongoing commitment to meeting the needs of the rapidly growing work-, learn-and play-from-home economy. All of our core businesses delivered year-on-year growth, while our Software and Services revenue grew to a new record,” said Yuanqing Yang, Lenovo chairman and CEO.

“As the world continues to adjust to the ‘new normal’, we are confident in the long-term growth potential of both devices and cloud infrastructure. We will continue to leverage our core competences of operational excellence and global/local footprint, while accelerating our service-led transformation to better grasp opportunities and drive sustainable growth.”

Lenovo said that 2020 continues to be a year with multiple industry factors impacting supply and manufacturing, including the ongoing geo-political uncertainties, the global Covid-19 pandemic, and industry-wide component supply shortages driven by strong demand.

“However, Lenovo sees a positive outlook for the second half of the year, with the new global norm of work, learn and play from home driving long-term growth trends in device demand and cloud/infrastructure requirements.

“In particular, the group expects the total PC market to grow well beyond current analyst forecasts to closer to 300 million units in calendar year 2020, around 25 million more than the total available market last year,” it said.

Lenovo said its Intelligent Devices Group (IDG) continues to lead the group’s growth with all-time record revenue for the PC and Smart Devices Group (PCSD) of $11.5 billion, up 8% year-on-year.

It reported record PTI of $723 million, showing growth of 18% year-on-year, and maintained an industry-leading profit margin of 6.3%. “Lenovo’s operational capability, timely response to the work and learn from home trend and focus on high-growth and premium segments drove the record quarterly performance,” the group said, noting that it leads the global PC market with a market share of 23.6%.

The Mobile Business Group (MBG) recorded revenue growth of 39% quarter-to-quarter.

“The quarter also saw key innovation milestones with the launch of the razr 5G foldable smartphone and the company’s first dedicated gaming phone under the Lenovo Legion brand. The business will continue to leverage its strong product portfolio and 5G innovation to drive future profitable growth,” it said.

The Data Centre Group (DCG) saw revenue grow 11% year-on-year to $1.48 billion, while the Cloud Service Provider segment saw revenue climb 34% year-on-year, with strong growth across all geographies.

Lenovo said its Intelligent Transformation division saw strong momentum in Q2, with double-digit growth in all its segments.

• Smart Internet of Things saw strong growth of over 36% year-on-year.
• Smart Infrastructure (21%) and Smart Verticals (72%) both delivered strong double-digit revenue growth.
• Software and Services grew 39% year-on-year to a new record of US$1.2 billion, representing more than 8.5% of group revenue.
• E-commerce revenue grew by over 40% year-on-year.

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