Behind The Sharp Increase Of Lenovo Group'S Financial Performance: Software And Service Business Become The Direction Of Future Transformation

Lenovo's latest financial report data, all business set the best data in history.

On May 27, Lenovo Group (HKSE: 992) (ADR: LNVGY) today announced its fourth quarter and full year results for the fiscal year 2020 / 21 as of March 31, 2021. According to the financial report, Lenovo Group's annual revenue reached 411.6 billion yuan last year, with a year-on-year growth of 19.8%; The pre tax profit was 12 billion yuan, and the net profit was nearly 8 billion yuan, with a year-on-year increase of more than 70%.

Among them, the fourth quarter turnover reached 106 billion yuan, a year-on-year increase of 48%, creating the fastest growth rate in nearly a decade. The pre tax profit was 2.58 billion yuan, and the net profit was 1.76 billion yuan, 5 times and 6 times of the previous fiscal year respectively.

"Lenovo Group has achieved remarkable results in diversification." Focusing on the results of this financial report, Yang Yuanqing, chairman and CEO of Lenovo Group, commented, "we hope to maintain a good growth trend in the next three to five years, and we also see this opportunity."

The whole line of business rose sharply

Although 2020 is an epidemic year, Lenovo's three major business groups have achieved rapid growth.

According to the financial report, in the whole year of 2020 / 21, the turnover of intelligent equipment business group reached a record of 368.7 billion yuan, a year-on-year increase of 20%. Among them, the income of personal computers and intelligent devices increased by 22% year-on-year, accounting for 80% of the group's total revenue. The pre tax interest rate increased by 0.6% to 6.5%, a record high, and the profit before tax increased by 34% year-on-year.

In the fourth quarter, the business of personal computers and intelligent devices reached a quarterly record, with a turnover of 84.27 billion yuan, a year-on-year increase of 46.3%, and the pre tax profit margin reached a record high of 6.7%. According to the latest forecast and analysis released by IDC, the PC market's shipment volume this year will reach 357 million units, an increase of 18.1%, which is more than 11 times higher than the previous forecast of 1.6%.

In terms of mobile business, despite the challenges posed by the outbreak in early 2020, the revenue of mobile business group increased by 9% in the current fiscal year. In the fourth quarter, the trend of profitability growth continued to show, with pre tax profit reaching 140 million yuan, a new high since the acquisition of Motorola mobility. The turnover increased by 86.4% year on year.

"Last quarter's profit was the highest since we acquired Motorola in 2015, and even exceeded Motorola's historical achievements. We did it." Yang Yuanqing analyzed that, on the one hand, it was cost control, on the other hand, it also benefited from product competitiveness“ Whether it's high-end folding screen, game phone or low-end mobile phone, whether it's instant launch or rapid volume increase, it's much better than in the past. "

Yang Yuanqing pointed out that the mobile business will continue to pursue profitable growth in the next step“ We can see the rapid growth of our mobile business, especially in developed markets, and we will not give up the growth of emerging markets. " Yang Yuanqing pointed out, "at present, we see that it is not demand that restricts our performance, but supply. I am confident that the mobile phone business will maintain high double-digit growth in the future."

In fiscal year 2020 / 21, the turnover of data center business reached RMB 42.9 billion, with a year-on-year increase of 15%; The business also performed well in the fourth quarter, with a turnover of 10.89 billion yuan, a year-on-year increase of 32%, higher than the average growth rate of the market for the fifth consecutive quarter. At the same time, the profit margin improved by 4.4 percentage points, the biggest increase in two years.

In terms of specific business, both cloud IT infrastructure business and enterprise IT infrastructure business have achieved business growth, of which the year-on-year growth rate of cloud IT infrastructure business is as high as 73%. In the areas of high-value storage, software defined infrastructure and software, DCG's turnover has reached a quarterly record high, with the storage business growing by 73% year-on-year.

"The data center's business is just one step away from losing money to making a profit." Yang Yuanqing said, "the outside world is also more and more confident in our related businesses, which also reflects our diversified achievements. Its sign is not only that the proportion of our business is more diversified, but more importantly, the profitability will be greatly improved."

Software and services revenue is expected

In the financial report of Lenovo, the growth of software and service revenue is the most anticipated, which also reflects the direction of Lenovo's future transformation.

According to the financial report, the overall turnover of Lenovo Group's software and service business reached a record 33 billion yuan, with an annual growth of 39% and an overall revenue of 8%“ I am very satisfied with the 8% share of software and services revenue in total revenue this year. " Yang Yuanqing said frankly.

However, Yang Yuanqing believes that this is only the first step in the software and services business. "There is still considerable room for growth in the future. Not only that, it will help us continuously improve profits."

In February this year, Lenovo established a new solution & Services Group (SSG). After the establishment of the new group, Lenovo's core business consists of three business groups, IDG intelligent equipment business group focusing on Intelligent Internet of things, and ISG infrastructure solution business group focusing on Intelligent Infrastructure (renamed from DCG, data center business group), And SSG solution service business group focusing on industry intelligence and service.

Ken Wong, Lenovo's senior vice president and head of SSG, said that the newly established SSG is the direction to better match Lenovo's intelligent transformation in the future. "SSG will integrate the capabilities of various business departments and service teams within Lenovo, including industry intelligent solutions, the growth of device as a service business, and the growth of operation and maintenance services, and go deep into all sectors to drive growth. We hope to become the core driving force of the company's transformation and deepen Lenovo's 3S transformation. "

In Yang Yuanqing's view, this also reflects Lenovo's future performance growth opportunities“ We see growth opportunities in the next three to five years. " Yang Yuanqing pointed out that this benefited from three trends. The first is the consumption upgrading trend brought about by the epidemic, the accelerated popularization of intelligent devices and the increase in the use market, which form the growth driving force of Lenovo's intelligent equipment business.

At the same time, the upgrading of infrastructure has brought not only the quantity but also the quality of Lenovo's related businesses“ From selling data centers and hardware equipment in the past to providing customers with overall solutions, we not only help customers build data centers, but also help enterprises carry out operation and maintenance. " Yang Yuanqing pointed out that "behind this is the growth potential of our software and services business."

In addition, Yang Yuanqing believes that the application upgrade trend also brings new opportunities for Lenovo“ Enterprises are upgrading from informatization and digitization in the past to intelligent today. We are seeing more and more demands for intelligent manufacturing, smart retail and smart education. Lenovo's current new organizational structure can cope with these new growth trends, so it is relatively optimistic about Lenovo's future growth. "

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