Lenovo Group Limited disclosed his financial results on August 15th.

As of June 30, 2019, Lenovo Group Limited's revenue in the first quarter of fiscal year 2020 reached 85.3 billion yuan, eight consecutive quarters of year-on-year growth, pre-tax profit of 1.64 billion yuan, an increase of more than 113%. The net profit was 1.1 billion yuan, an increase of more than 111% over the same period last year.

一

In this financial report, Lenovo Group Limited first disclosed several bright spots:

1. In PC business, Lenovo continues to rank first in the world, with a turnover of 65.7 billion yuan, an increase of 17.9% over the same period last year, and a market share of 24.9%, ranking first in the world.

2. Mobile business also maintained continuous profits. Pre-tax profits improved by $700 million for four consecutive quarters compared with the same period last year. While overall mobile phone sales in North America declined, Lenovo's mobile phone sales increased by 28.4% year-on-year. In the Latin American market, Lenovo's mobile phones grew faster than or synchronized with the market for 11 consecutive quarters, and pre-tax profit margins improved by more than 14% year-on-year.

3. The global share of X86 server market jumped to the fourth place, becoming the number one supplier of TOP500 in the world.

4. In the PC category, the revenue of workstation category grew by more than 42%, the revenue of game PC grew by more than 30%, and the revenue of lightweight category grew by more than 29%.

This seems to be a good start, and after several years of difficult transition, Lenovo seems to be starting to get out of the quagmire, and the prospects are good.

However, if you dig deeper, you will know that this is a mixed financial report. Although the data is good on the face of it, there is some "stunting" on the split, and its revenue structure remains the same. The highly anticipated mobile phone and data center business has once again become a drag on performance.

On august 15th, the capital market gave its attitude, and Lenovo Group Limited's share price plunged 6 per cent to HK $5.64.

二

From the perspective of financial results, although Lenovo's performance has achieved great growth, but in fact, the PC business is outstanding, when we put aside the appearance, we can see more.

On the whole, Lenovo's business can be divided into two parts, namely smart hardware and data center.

In terms of intelligent hardware, it mainly includes PC service and mobile service. Among them, PC business, thanks to the global PC market recovery environment, Lenovo maintained the first position in the world, accounting for 24.9% of the share, revenue reached 65.7 billion yuan.

Revenue from the mobile business, mainly mobile phones, was about $1.594 billion in the fiscal quarter, down 9% from a year earlier, showing a downward trend. It is also mainly related to the global mobile phone industry's entry into the stock market, but surprisingly, Lenovo's mobile phone sales increased by 28.4% year-on-year, and its pre-tax profit margin improved by more than 14% year-on-year. Lenovo's mobile phones have surpassed or synchronized with the market for 11 consecutive quarters.

In terms of data centers, Lenovo Group Limited's income is also declining, with income of 1.356 billion US dollars, down 17% from the same period last year.

This achievement is obviously not in line with Lenovo's expectations in the past, which envisioned that Lenovo would gradually reduce the proportion of PC in the future, and then let mobile and data center businesses carry the banner and welcome the next era.

But today, this achievement is far from what we had imagined in the past, and it is a long way off. In terms of overall share, although the proportion of PC business has decreased compared with 2018, it is still Lenovo's pillar business, reaching 77%. Especially in the case of the decline of mobile business and data center business, the position of PC business is more prominent.

As for the decline in data center business, Lenovo Group Limited explained that, "the industry in which the data center is located is trapped by the depressed demand of the whole industry." The main challenge is that some and large super-large data centers are hoarding inventories after a surge in growth last year. Another key industry challenge is the sharp drop in commodity prices. "

The meaning of this paragraph is very simple, that is, the data center is in the doldrums and has inventory.

However, the tuyere of this industry has just arrived and has entered the stock market so soon? This seems to be very different from the original idea.

三

But does Lenovo really have to rely on its PC business to support its growth? Obviously, we can see some clues from some data and strategic layout.

In 2019, especially in the second quarter, the global PC market environment is actually very positive, and the PC field, after decades of development, has entered a bottleneck period, technological innovation is not strong, so there is bound to be Matthew effect in this field.

It means that for a long time to come, the odds are that the strong will always be strong, and Lenovo Group Limited will eat the cake of PC.

But how big is the whole PC market? The market volume almost determines its ceiling, and now the world's PC market is occupied by five major manufacturers. If you dare to chase me, the probability of falling behind is small.

On the contrary, in the current era of mobile Internet, some mobile phone manufacturers have begun to attack the field of PC, such as Huawei and XIAOMI in China. PC business has achieved substantial growth in recent years, and with the release of Hongmeng, we can also see some trends in the future, that is, the interconnection between major terminals is a major trend, and there is a high probability that the future battlefield will not fight alone, but the development of "sea, land and air" as a whole. In the past, Microsoft Corp was the first to make such an attempt and released windows phone, which was regarded as the first bite of this crab, but in the end, due to ecological reasons and the drag of Microsoft Corp's own system, it ended in failure.

However, this demand and trend does not disappear. Sticking to PC business is not a good choice. Lenovo places this task on mobile business and data business.

In late 2014, Lenovo acquired Motorola's mobile phone business, allowing it to enter the North American market and achieve 30% sales growth in the fourth quarter of 2018.

Although Motorola's performance has not been excellent in the past few years, Lenovo's mobile phone business has risen in China in the second half of 2018, and Motorola Mobility has made a global turnaround for the first time.

However, the declining performance really makes it difficult for people to have the confidence to shoulder heavy responsibilities.

The same is true of the data business. Lenovo has been transforming its data center business in recent years after acquiring the IBM system X project in 2014.

In 2015, data center businesses such as the fastest growing ultra-large-scale infrastructure, software-defined data centers, high-performance computing, artificial intelligence, solution-based data center infrastructure and services were restructured to form separate business groups.

Lenovo's data center business has been consolidating over the past two years, and the loss narrowed to $52 million from $63 million in the same period last year, but it was based on a 17% year-on-year decline in sales, meaning less sales. so the money is posted less.

Data business is highly expected by Lenovo. Edge computing, cloud computing, Internet of things and AI all need this new server form. Unfortunately, it seems that it is not going well at the moment.

Conclusion

Over the years, Lenovo Group Limited has been affected by the PC market environment, and even the performance is also determined by this market.

We see that Lenovo is eager to get rid of the shackles of PC, want more diversified development, and look to the future.

But at present, it is at a very important level, and it is also a dangerous shore. in the case of continuous technological updates and iterations in the world, it is obviously not possible to eat the old capital. The 5G era is approaching. This may be an opportunity for Lenovo Group Limited to get out of the predicament, and it is also the key to determine whether the future is booming or declining.