Lenovo Quietly Plows Forward And Delivers Strong Fiscal Q1 Results

Daniel Newman / August 16, 2019

ONG KONG, August 15, 2019 – Lenovo Group (HKSE: 992) (ADR: LNVGY) today announced group revenue in the first quarter reached US$12.5 billion, the eighth consecutive quarter of growth. Pre-tax income more than doubled year-on-year, growing by US$127 million to reach US$240 million. Net income also more than doubled, up US$85 million to US$162 million.

Basic earnings per share for the first quarter were 1.37 US cents or 10.74 HK cents.

“This fiscal year kicked off to an excellent start. Once again, this quarter’s strong results provided solid evidence that Lenovo’s Intelligent Transformation is enabling the company to drive sustainable, profitable growth in today’s dynamic and changing world. Our persistent execution and operational efficiency allows us to bring our vision to life and deliver smarter technology for all,” said Yang Yuanqing, Lenovo Chairman and CEO. Read the full press release on Lenovo’s news hub.

Analyst Take: While Lenovo doesn’t always get the coverage that some other major tech players do (and that they probably deserve), the company had a very strong performance for their FY ’20 first quarter that included growth on revenue and a significant beat on revenue as their income YoY doubled.

Wins on Many Fronts: 

The company has a lot to feel good about on the heels of their first quarter numbers. Some of the highlights that I took note of:

• PC Market Growing: The overall PC market and its demise continues to be largely overstated as numbers indicate the market grew by 1.5% after a couple of down quarters. This isn’t to say their will be a boon of growth, but mobile devices aren’t ridding us of the need for PC’s anytime soon. 
• Overall and Group Revenue Growing: The company has now delivered 8 consecutive quarters of growth. PC’s are growing, Smart Devices are growing and Data Center Group (DCG) are growing. 
• Margin Growing: The growth of revenue is one thing, but historically Lenovo didn’t always grow margin when they were chasing market share. Well now they have accomplished both. 
• PC Market Share Growing: Lenovo saw their market share grow to nearly 25%, noted as an all time high for the company. 
• Geographic Distribution: Americas saw 20% revenue growth and Asia Pac doubled that at 40%. All four of their regions, which are rounded out by EMEA and Greater China delivered over $2 Billion USD, which should provide some cover as one of the major concerns about the company is the ongoing US-China trade tension.

Returning to the Top Spot

In the end, what all of these wins has yielded the company is a return to the #1 PC Maker in the world with data reporting the company holding over 25% marketshare within the industry. Over the past couple of years, HP had managed to wrestle those honors away, so it is encouraging to see the company claw back without sacrificing margin to do so. 

Making a Big Play in Services

Looking forward: Lenovo is somewhat quietly having quite a bit of success. While their entree into mobile hasn’t paid off just yet, they are firing on all cylinders in PC, Data Center and Services. As someone who pays close attention to data center and high performance compute, the company is seeing success in those areas as well. With their new AMD EPYC based servers that launched on the heels of last week’s announcements, the company will likely see a benefit with any success AMD is able to have wrestling market share in the enterprise. That is still a bit cloudy given AMD’s tiny current market position, but the post launch fodder seems to indicate some shifts that could take place. 

I’m also bullish on the company’s growing services portfolio. Of course the contract attachment growth to their PC’s has yielded increased margin and revenue, but what I’m actually speaking to is the company’s newly launched consumption based data center solutions for storage. HPE has enjoyed a strong head start in this space, but Lenovo enters the market with a competitive offering that shows potential of competing for market share. This will be one to watch. 

Overall, a promising start. I’m anxious to see and hear more from Lenovo and I have a funny feeling that I will be. 

[Side note: I’ve been testing a really amazing Lenovo Yoga ACPC powered by ARM Based technology with Qualcomm inside. All I can say is WOW!]

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Futurum Research is provides industry research and analysis. These columns are for education purposes only and should not be considered in any way investment advice. 

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