Lenovo posts record revenue as worldwide smartphone shipments rise 50pc

PUBLISHED : Thursday, 21 May, 2015, 4:07pm
UPDATED : Thursday, 21 May, 2015, 7:07pm

Lenovo, the world’s largest supplier of personal computers, plans to pursue new partnerships to further diversify its operations after earning record revenue last financial year.

“In view of the opportunities and challenges of the new internet-plus era, we are ready to transform ourselves from making mostly hardware to a combination of hardware and software services,” Lenovo chairman and chief executive Yang Yuanqing said  on Thursday.

That would entail entering into strategic alliances with online and content service providers to better engage target customers.

Yang predicted the strategy would “spur a new wave of growth for Lenovo in the coming years” as it included “a focus on personalisation and connectivity to networks, device to device and cloud services”.

On Wednesday, Lenovo announced the formation of a new subsidiary, 17TV, that will sell its internet-ready televisions online with the support of a subsidiary of e-commerce-giant Alibaba. 

Aliyun, the cloud services operation of Hangzhou-based Alibaba, will provide the online retail platform and video content for 17TV. The new Lenovo unit has also teamed up with Chinese online search titan Baidu and BesTV New Media for other content.

Cloud services enable consumers to buy, lease, sell or distribute software and other digital resources online, just like electricity from a power grid. These resources are hosted and managed in data centres.

Although below analysts’ estimates of US$857 million, Lenovo’s net profit advanced by 1 per cent to US$829 million in the year to March 31, from US$817 million a year earlier. Operating expenses rose 39 per cent largely due to costs incurred after last year’s completion of the purchase of Motorola Mobility for US$2.91 billion and IBM’s System X server business for US$2.1 billion.

Revenue grew 20 per cent to a record US$46.296 billion, up from US$38.707 billion the previous financial year, on the back of strong personal computer, smartphone, tablet and server sales. That turnover included two quarters of System X and five months of Motorola performance.

Lenovo, which operates in more than 160 countries, saw personal computer sales increase 5 per cent year on year to US$33.346 billion, contributing 72 per cent to total revenue. Bernstein Research senior analyst Alberto Moel said in a report that Lenovo would continue to benefit from consolidation in the personal computer industry.  

International expansion allowed Lenovo’s mobile business sales to jump 71 per cent year on year to US$9.142 billion, making up 20 per cent of total revenue. Smartphone shipments rose 50 per cent year on year to a historic high of 76 million units.

“For Motorola, its relaunch in China in February … should be incrementally positive to unit growth,” Kirk Yang, Barclay’s head of technology hardware research for Asia excluding Japan, said in a report. 

Enterprise business sales soared 420 per cent year on year to US$2.628 billion, representing 6 per cent of total revenue. Lenovo president Gianfranco Lanci said China would be the growth driver for server sales.