Lenovo data centre group still struggling despite big clouds' COVID-catchup shopping spree
(2020/11/03)
- Reference: 1604394064
- News link: https://www.theregister.co.uk/2020/11/03/lenovo_h1_2021/
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Lenovo has posted interim results for Q2 and the first half of 2020 and revealed that while clouds went on a spending spree, the company’s data centre group (DCG) is still making losses.
Revenue from cloud service providers jumped 33 percent, helping DCG to 15 percent year-on-year revenue growth and a final half-year tally of US$3.091bn. Sales to enterprises and SMEs grew three per cent, which Lenovo says was faster than the rest of the market. But the company described that growth as “sluggish since the start of the COVID-19 pandemic.”
“The business was successful in driving double-digit year-on-year sales growth across its four growth segments: software defined infrastructure, storage, software and services,” investors were told. Lenovo was also pleased to have sold more services to data centre hardware buyers.
But the DCG still lost $105m before tax, up $2m year-on-year. Investors were told that the company is working to improve the situation. Which is just what Lenovo has been saying almost since the day it acquired IBM’s x86 server business.
Laptops are on fire! In a good way (if you're selling). PC sales race to highest growth rate since 2011 [1]READ MORE
The company’s PC business did better, bringing in $22.07bn of revenue, growing 8.8 percent year-on-year and enjoying growth across the PC range. Thin-and-light notebook PC sales grew 32 percent year-on year and direct online sales grew by 47 percent year-on-year.
Smartphones continued to be a trouble spot, with revenue down 13.3 percent to $2.6bn. A pre-tax loss of $72m was the result, but Lenovo says that was largely caused by “a significant hike in freight and logistics costs due to limited flight capacity”. 5G and foldable Razr phones are hoped to turn things around.
Motorola profits were whacked by 'a significant hike in freight and logistics costs due to limited flight capacity'
Overall, the business is in fine shape.
Q2 saw $14.52 of revenue arrive and profit of $350m. For the half-year, revenue reached $27.9bn and profit hit $596m. Those numbers were all up on the same period for 2019.
But the black ink was also almost all attributable to PCs, and while Lenovo is the leader in that field the COVID-19 pandemic created a surprise surge in demand.
Lenovo’s [2]interim results announcement [PDF] both recognises that 2020 is a likely outlier, but also suggests Lenovo can maintain its trajectory.
“The fundamental change in consumer behavior and the Group’s robust order book, especially for the PCSD business, is a solid proof that long-term structural demand tailwinds will enlarge the addressable market and support future growth,” investors were told.
In mobile, the company thinks that better performance in North America and Europe will help a return to profitability.
Lenovo to slap ThinkShield security standard for laptop line-up on its Motorola mobiles [3]READ MORE
And in the data centre group, the company plans to “grow its high-margin services attach rate, upsell premier services and expand hybrid cloud solutions to continue driving a paradigm shift in computing with its edge-to-cloud solutions.”
New designs of cloudy kit are expected to help win new business and entice current customers
“Since the outbreak of the pandemic, the Group has been seeing a surge in market interest in its service capability and continues to build a strong pipeline of new orders for Attached Services, Managed Services which includes Device as a Service, and Complex Solutions,” the statement says. “The comprehensive Software and Services offerings and well-established e-commerce infrastructure will lead to new growth opportunities.” ®
Get our [4]Tech Resources
[1] https://www.theregister.com/2020/10/12/pc_sales_up_2020/
[2] https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1103/2020110300415.pdf
[3] https://www.theregister.com/2020/10/29/motorola_lenovo_thinkshield_for_mobile/
[4] https://whitepapers.theregister.com/
Revenue from cloud service providers jumped 33 percent, helping DCG to 15 percent year-on-year revenue growth and a final half-year tally of US$3.091bn. Sales to enterprises and SMEs grew three per cent, which Lenovo says was faster than the rest of the market. But the company described that growth as “sluggish since the start of the COVID-19 pandemic.”
“The business was successful in driving double-digit year-on-year sales growth across its four growth segments: software defined infrastructure, storage, software and services,” investors were told. Lenovo was also pleased to have sold more services to data centre hardware buyers.
But the DCG still lost $105m before tax, up $2m year-on-year. Investors were told that the company is working to improve the situation. Which is just what Lenovo has been saying almost since the day it acquired IBM’s x86 server business.
Laptops are on fire! In a good way (if you're selling). PC sales race to highest growth rate since 2011 [1]READ MORE
The company’s PC business did better, bringing in $22.07bn of revenue, growing 8.8 percent year-on-year and enjoying growth across the PC range. Thin-and-light notebook PC sales grew 32 percent year-on year and direct online sales grew by 47 percent year-on-year.
Smartphones continued to be a trouble spot, with revenue down 13.3 percent to $2.6bn. A pre-tax loss of $72m was the result, but Lenovo says that was largely caused by “a significant hike in freight and logistics costs due to limited flight capacity”. 5G and foldable Razr phones are hoped to turn things around.
Motorola profits were whacked by 'a significant hike in freight and logistics costs due to limited flight capacity'
Overall, the business is in fine shape.
Q2 saw $14.52 of revenue arrive and profit of $350m. For the half-year, revenue reached $27.9bn and profit hit $596m. Those numbers were all up on the same period for 2019.
But the black ink was also almost all attributable to PCs, and while Lenovo is the leader in that field the COVID-19 pandemic created a surprise surge in demand.
Lenovo’s [2]interim results announcement [PDF] both recognises that 2020 is a likely outlier, but also suggests Lenovo can maintain its trajectory.
“The fundamental change in consumer behavior and the Group’s robust order book, especially for the PCSD business, is a solid proof that long-term structural demand tailwinds will enlarge the addressable market and support future growth,” investors were told.
In mobile, the company thinks that better performance in North America and Europe will help a return to profitability.
Lenovo to slap ThinkShield security standard for laptop line-up on its Motorola mobiles [3]READ MORE
And in the data centre group, the company plans to “grow its high-margin services attach rate, upsell premier services and expand hybrid cloud solutions to continue driving a paradigm shift in computing with its edge-to-cloud solutions.”
New designs of cloudy kit are expected to help win new business and entice current customers
“Since the outbreak of the pandemic, the Group has been seeing a surge in market interest in its service capability and continues to build a strong pipeline of new orders for Attached Services, Managed Services which includes Device as a Service, and Complex Solutions,” the statement says. “The comprehensive Software and Services offerings and well-established e-commerce infrastructure will lead to new growth opportunities.” ®
Get our [4]Tech Resources
[1] https://www.theregister.com/2020/10/12/pc_sales_up_2020/
[2] https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1103/2020110300415.pdf
[3] https://www.theregister.com/2020/10/29/motorola_lenovo_thinkshield_for_mobile/
[4] https://whitepapers.theregister.com/