Combining shipments of Motorola and Lenovo-branded devices made Lenovo a truly global player, the third largest vendor of smartphones behind Samsung and Apple and their most credible challenger. Together, the two brands had nearly 6.6 percent market share, up 78 percent year-on-year. Global tablet market share was 4.8 percent, with 3.7 million shipments, up 9 percent year-over-year, powered by the launch of our latest Yoga tablet.
Unlike many smaller mobile phone players that rely almost completely on a slowing China market, Lenovo now drives about 60 percent of its mobile phone volumes outside China, having entered 67 countries in the last two years. Lenovo has built the scale, distribution, brand assets and IP portfolio required to compete around the world and challenge the top two players. And, as smartphone trends move from premium to mainstream, and mature to emerging markets, Lenovo is in the best position to capture these next waves of growth and deliver its stated profitability commitments in the Motorola business.
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$1.2 billion. Sales of the System x unit were US$986 million. Only 90 days into the integration of System x, EBG delivered positive operational PTI, although its standard PTI – which included non-cash, M&A-related items – was negative US$42 million. It is solidly on track to be a US$5 billion business with better margins than PC in 1 year.
Combined shipments of Lenovo ThinkServer and System x servers made Lenovo number 3 worldwide, with 10.4 percent market share. Despite the intense competitive fire in the year since Lenovo said it planned to acquire System x, its business is stabilizing, with rapid success in China making it number one in that market, while benefiting from access to new opportunities in 160 countries that were previously unavailable to IBM or Lenovo.
Lenovo’s China geography totaled US$4.1 billion in revenue in the third fiscal quarter, an increase of 1 percent year-over-year, which accounted for 29 percent of the Company’s worldwide revenue, while operating margin improved by 0.3 points year-over-year to 5.7 percent. During the third quarter, Lenovo protected its PC leadership with 38.2 percent share. Fierce competition in the China mobile phone business was a drag on the performance of Lenovo-brand smartphones.
In the Asia Pacific geography, Lenovo’s revenue totaled US$1.7 billion for the third quarter, or 12 percent of the Company’s worldwide revenue, up 7 percent year-over-year, with record high operating margin of 5.4 percent, up 3.9 points year-over-year and record high PC market share at 16.1 percent, up 0.2 points year-over-year. Strong volumes in smartphone shipments were seen across the ASEAN region.
Lenovo’s revenue in the Europe/Middle East/Africa (EMEA) geography during the third fiscal quarter saw continued growth and increased profitability with revenue up US$1.6 billion, a 40 percent increase, to reach US$4 billion, while margin improved by 1.2 points year-on-year to 3 percent. Powered by strong consumer performance, this success drove a record-setting contribution to Lenovo’s worldwide revenue of 29 percent. During the quarter, Lenovo had record PC market share of 19.6 percent in EMEA, up nearly 4.4 points. Lenovo achieved the number 1 position in PC across 13 EMEA countries, further improving its number two position in the EMEA PC market.
The Americas geography revenue was US$4.3 billion for the third fiscal quarter, up 88 percent year-over-year, comprising 30 percent of the Company’s worldwide revenue, mainly due to the inclusion of Motorola and System x in the geography’s results. The Americas geography saw PC market share of 11.1 percent. Lenovo maintained the number four position in the US while avoiding fierce price competition in lower end, low profit devices to protect profitability. The North America region saw strong revenue and shipment growth and solid profit improvements, while the Company is taking decisive action to reverse challenges in Brazil, which impacted the geography’s overall performance.
* These figures are provided for greater transparency and to aid further
analysis of the business.
** see IDC data 4Q 2014
*** Previously, the company provided financial breakdowns by product. With the acquisitions of Motorola and System x, management believes reporting by business groups best reflects the Company’s performance.
Lenovo (HKSE: 992)(ADR: LNVGY) is a $39 billion global Fortune 500 company and a leader in providing innovative consumer, commercial, and enterprise technology. Our portfolio of high-quality, secure products and services covers PCs (including the legendary Think and multimode YOGA brands), workstations, servers, storage, smart TVs and a family of mobile products like smartphones (including the Motorola brand), tablets and apps. Join us on LinkedIn, follow us on Facebook or Twitter ( @Lenovo) or visit us at www.lenovo.com.
(in US$ millions, except per share data)
|Gross profit margin||14.9||%||12.6||%||2.3 pts|
|Expenses-to-revenue ratio||12.6||%||9.5||%||3.1 pts|
|Other non-operating expenses||(51||)||(13||)||287||%|
|Profit for the period||257||265||-3||%|
|Profit attributable to equity holders (net income)||253||265||-5||%|
|EPS (US cents)|