Lenovo Delivers Profitable Second Quarter FY 2016/17 Results

In our Mobile Business Group (MBG), which includes Motorola products and Lenovo-branded mobile phones, Lenovo’s sales for the second fiscal quarter were US$2 billion, down 12 percent year-over-year, but a significant 20 percent increase compared to last quarter. MBG showed a pre-tax loss of US$156 million, with a pre-tax profit margin of minus 7.7 percent, an improvement of 4.4 points compared to the previous quarter.

Shipments in MBG product lines in the second quarter grew almost 25 percent compared to the previous quarter to a total of 14 million. Lenovo continued to increase mobile shipments in both Asia Pacific and India, with mobile shipments in India increasing 15 percent year-over-year. Moto shipments were up almost 40 percent from the previous quarter due to Moto G and successful launches of new Moto Z and Moto Mods.

For our Data Center Group (DCG), which includes servers, storage, software and services, sales in the second fiscal quarter were US$1.1 billion, an eight percent decrease year-over-year. However, DCG did see a seven percent revenue growth in China year-over-year, and a 12 percent growth in Latin America, as well as another strong quarter of growth in our global accounts of 16 percent. DCG recorded a pre-tax loss of US$141 million, with a pre-tax profit margin of minus 13.1 percent.

Lenovo has a focused execution plan for this business: we are strengthening our field capabilities and channel engagement, investing in training and overhauling our sales structure to better engage with our customers. We are also forging new industry partnerships and building next-generation IT to improve our competitiveness, as we have shown in our hyperscale business.

Geographic Overview

In China, consolidated sales in the second fiscal quarter declined four percent year-over-year to US$3.2 billion, or 29 percent of the Company’s total worldwide sales. Pre-tax income increased marginally to US$158 million year-over-year, while pre-tax income margin gained almost a full point, to 4.9 percent.

In Asia Pacific in the second fiscal quarter, Lenovo booked sales of US$1.9 billion, or 17 percent of the Company’s total worldwide sales, down four percent year-over-year. Pre-tax income declined to US$2 million, while pre-tax income margin dropped almost a full point, to 0.1 percent.

In Europe, Middle East and Africa, Lenovo had consolidated sales in the second fiscal quarter of US$2.7 billion, a decrease of 14 percent year-over-year, representing 24 percent of the Company’s total worldwide sales. The region had a pre-tax loss of US$65 million and pre-tax loss margin of 2.4 percent.

In the Americas, consolidated sales in the second fiscal quarter declined seven percent to US$3.4 billion, or 30 percent of the Company’s total worldwide sales. Pre-tax income for the quarter was US$20 million, compared to a loss of US$73 million compared to last year. Pre-tax income margin was 0.6 percent.

About Lenovo

Lenovo (HKSE: 0992) (PINK SHEETS: LNVGY) is a US$45 billion global Fortune 500 company and a leader in providing innovative consumer, commercial, and enterprise technology. Our portfolio of high-quality, secure products and services covers PCs (including the legendary Think and multimode YOGA brands), workstations, servers, storage, smart TVs and a family of mobile products like smartphones (including the Motorola brand), tablets and apps. Join us on LinkedIn, follow us on Facebook or Twitter ( @Lenovo) or visit us at www.lenovo.com.

 

LENOVO GROUP

FINANCIAL SUMMARY

For the fiscal quarter ended September 30, 2016

(in US$ millions, except per share data)

   


Q2 16/17


Q2 15/16


Y/Y CHG

Revenue 11,231 12,150 -8%
Gross profit 1,607 1,575 2%
Gross profit margin 14.3% 13.0% 1.3 pts
Operating expenses (1,392) (2,359) -41%
Expenses-to-revenue ratio 12.4% 19.4% -7.0 pts
Operating profit/(loss) 215 (784) N/A
Other non-operating expenses (47) (58) -18%
Pre-tax income/(loss) 168 (842) N/A
Taxation (16) 125 N/A
Profit/(loss) for the period 152 (717) N/A
Non-controlling interests (5) (3) 71%
Profit/(loss) attributable to equity holders

157

(714)

N/A

EPS(US cents)
Basic

1.42

(6.43)

N/A

Diluted

1.42

(6.43)

N/A

 





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