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Lenovo has reported net loss of US$72 million for the fiscal first quarter ended June 30, 2017, during which the companmy recorded quarterly revenues of US$10 billion, flat on year, but an increase on quarter of 4.5%.
First-quarter pre-tax loss came to US$69 million, according to Lenovo. Operating profit for the quarter was up US$110 million sequentially. The company’s gross profit for the fiscal first quarter decreased 11% on year to US$1.4 billion, yet remained flat on quarter, with gross margin at 13.6%. Basic loss per share for the quarter was US$0.66.
Lenovo said it introduced its 3-wave strategy – namely balancing PCSD growth and profit, accelerating our DCG and MBG growth engines, and investing in non-hardware areas – to meet today’s market dynamics while positioning the company for longer-term profitable growth. Lenovo said it is investing in core technology and next-generation platforms that will help customers move towards a smart Internet era where all smart devices will be connected to the cloud and powered by artificial intelligence (AI).
While Lenovo is focused on new technologies with its Device plus Cloud strategy, the Lenovo Capital and Investment Group (LCIG) – the company’s provider of IoT solutions – reached a first quarter milestone of over three million users on its Global API platform, according to the company.
As Lenovo continued to expand its ecosystem, LenovoID (an identification of directly reachable users across Lenovo devices) reached 225 million users in the first quarter. The progress Lenovo is making in its non-hardware businesses, such as software, services, and Big Data, is already gaining significant traction and winning new customers, it said.
In its PCSD business group, which includes PCs, tablets and smart devices, the average selling price (ASP) of its PC plus tablet products improved 7.8% on year. Despite industry-wide component shortages and subsequent cost-hike pressures, Lenovo maintained profitability.
PCSD revenues were US$7 billion, with flat growth on year. However, sequentially, PCSD revenues grew 4.8%. Pre-tax income was US$291 million and pre-tax income margin fell to 4.2%, mainly due to the industry-wide increased component costs.
Lenovo said its PC business in the first quarter recorded share gains in Asia Pacific, Europe and Latin America, and worldwide shipped 12.4 million units. In China, where Lenovo still enjoys almost 36% market share, the company said it appointed a new consumer-focused leader to run its PCSD business. In North America as well, where the PCSD business has been flat, new leadership is now in place to help boost sales.
Lenovo’s MBG, which includes Moto and Lenovo-branded smartphones, saw encouraging revenue growth outside of China to US$1.7 billion, a 7.6% increase on year. Lenovo said it achieved its publicly-stated goal of selling three million Moto Z smartphones within the first 12 months.
For the second consecutive quarter MBG has continued to grow revenues and improve profitability, with revenues up 2% on year to US$1.7 billion and a pre-tax income margin improvement of 2.2pp during the same period.
With 11 million smartphones shipped in the first quarter, Lenovo’s shipments grew 12.3% on year outside of China, driven by significant gains in both Western Europe and Latin America, up 137% and 56% respectively on year.
Lenovo’s DCG, which includes servers, storage, software and services, continued to focus on the transformative actions that will help drive long-term DCG competitiveness. These actions helped to stabilize the business outside of China in the first quarter with on-quarter revenue growth of 14%. Particularly encouraging was the on-year revenue growth in Western Europe and North America of 11% and 8% respectively, including on-quarter revenue growth of 22% and 19% respectively, Lenovo said.
|
Lenovo financial summary, Apr-Jun 2017 (US$m) |
|||
|
Apr-Jun 2017 |
Apr-Jun 2016 |
Y/Y |
|
|
Revenues |
10,012 |
10,056 |
– |
|
Gross profit |
1,365 |
1,534 |
(11%) |
|
Gross profit margin |
13.6% |
15.3% |
(1.7pp) |
|
Operating expenses |
(1,371) |
(1,289) |
6% |
|
Expenses-to-revenue ratio |
13.7% |
12.8% |
0.9pp |
|
Operating profit |
(6) |
245 |
N/A |
|
Other non-operating expenses |
(63) |
(39) |
60% |
|
Pre-tax income |
(69) |
206 |
N/A |
|
Taxation |
15 |
(38) |
N/A |
|
Profit for the period |
(54) |
168 |
N/A |
|
Non-controlling interests |
(18) |
5 |
N/A |
|
Profit attributable to equity holders |
(72) |
173 |
N/A |
|
Basic EPS (US$) |
(0.66) |
1.57 |
N/A |
|
Diluted EPS (US$) |
(0.66) |
1.56 |
N/A |
Source: Company, compiled by Digitimes, August 2017
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