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Motorola integration impacts as Lenovo tightens grip on PC market

Motorola integration impacts as Lenovo tightens grip on PC market

“Building on our newly acquired businesses and consistent organic growth of our core operations, three growth engines have been formed."

Lenovo, the world’s largest PC maker according to sales, continues to deliver strong profit growth across its lucrative PC business, despite the ongoing impact of the company's Motorola integration.

For the full year, Lenovo has recorded revenue of US$46.3 billion, up 20 percent year over year and slightly below analyst expectations.

In the same period its pre-tax income before non-cash, M&A-related accounting charges of US$168 million, was US$1.14 billion, up 12 percent year over year.

Similarly, net income before non-cash, M&A-related accounting charges was US$997 million, up 22 percent year-over-year.

Gross profit for the full year was US$6.7 billion, an increase of 32 percent year-over-year while gross margin was 14.4 percent, while operating profit for the full fiscal year was US$1.1 billion, a five percent increase year-over-year.

At the same time, Lenovo continued to deliver “exceptional performance” in PCs this year with a record 60 million shipments, and strong profitability, all while maintaining its number one position in the market for the eighth consecutive quarter.

“Lenovo continues to deliver strong and balanced performance,” says Yang Yuanqing, Chairman and CEO, Lenovo.

“Building on our newly acquired businesses and consistent organic growth of our core operations, three growth engines have been formed.

“While our Mobile Business Group and Enterprise Businesses Group grew rapidly, our PC business delivered even stronger results, with record market share and increased profitability.

“The integrations of Motorola Mobility and System x businesses are on track and realising good growth momentum, although further time will be required to develop them before they become core businesses like PCs.

“In view of the opportunities and challenges of the new Internet+ era, we are ready to transform ourselves from making mostly hardware to a combination of hardware and software services.

“This will spur a new wave of growth for Lenovo in the coming years.”

Breakdown

According to Yuanqing, in smartphones, Lenovo remained the world’s no.3 with 18.7 million in Q4 and a record 76 million in FY 2014/15 shipments and increasing balance globally.

For the year, which included two quarters of contributions from Motorola, China accounted for 59 percent of Lenovo’s smartphone volumes, while markets outside China saw 450 percent growth hitting 31 million smartphone devices shipped.

In tablets, Lenovo outpaced the market and continued to grow with a total of 12 million units shipped, an increase of 26 percent year-over-year, and 5.1 percent market share.

Motorola contributed more than 7.8 million units in the quarter to Lenovo’s total, up 23.6 percent year-over-year, while adding US$1.8 billion to Lenovo’s MBG revenues.

Motorola also hit a major operational milestone by re-entering China in January and it remains on track to be profitable within 4-6 quarters of close.

In the Enterprise Business Group or EBG, which includes servers, storage, software and services sold under both the Lenovo ThinkServer brand and the System x business unit, sales were US$1.1 billion.

In its second full quarter with System x, EBG delivered positive operational pre-tax income, although its standard PTI – which included non-cash, M&A-related accounting charges – was negative US$45 million.

Lenovo continued as #3 in x86 servers, while its ThinkServer brand targeting small and medium sized enterprises saw 49 percent revenue growth year-over-year. EBG remains on track to be a US$5 billion business within one year of close.

Regionally

In the Asia Pacific geography, Lenovo’s revenue totalled US$1.7 billion for the fourth quarter, or 15 percent of the company’s worldwide revenue, with operating margin of 4.6 percent, up 1.9 points year-over-year, while PC market share was at 15.7 percent, up 0.2 points year-over-year.

Across the region we had strong smartphone shipment growth up 40 percent year-over-year driven by our Motorola investment.

In the Enterprise business, the company is leveraging Lenovo’s channel expertise and ecosystems to accelerate System x sales.

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