Lenovo will refocus its PC business, concentrate on higher-priced smartphones and expand its presence in the hyperconvergence market as it struggles with revenue declines and fierce competition, the company said Thursday.
The China-based PC giant is a go-to brand in its home territory, but sales declined there in its fiscal first quarter, which ended 30 June, and all the while, competitors such as Dell and Cisco are expanding in that market.
Competitive pressure will force Lenovo to make adjustments to its go-to-market strategies and accelerate sales with “large-scale, transformation-centric” customers, said Krista Macomber, an analyst with Technology Business Research.
Lenovo said in a statement that its data centre group would make strategic investments in its channel programs, sales force and marketing to drive growth and improve its financial footing.
In a statement, Lenovo Chairman and chief executive Yuanqing Yang said the company would refine its focus in key markets to spur growth.
“In PCs we will focus on high-growth segments and leverage industry consolidation to resume growth,” Yang said.
“In smartphones, we will leverage innovative, differentiated products and continue to shift to higher-price bands to drive growth and turn around this business. In data centres, we will continue to expand in hyperconverged technology, and improve profitability in the hyper-scale business.”
In its first quarter, Lenovo’s sales challenges were global. The company reported revenue of about US$10 billion, a six percent year-over-year decline compared to the same quarter a year earlier.
Sales in the Americas declined 6.6 percent to about US$3 billion. In China, sales fell 9.8 percent to US$2.9 billion.
The company saw a seven percent year-over-year decrease in PC sales; a six percent decline in its mobile business; and a one percent increase in its data centre business.
The PC group booked an operating profit of US$370 million, a 2.4 percent year-over-year increase. But the data centre group saw its operating losses deepen to US$64 million from US$40 million a year ago, while the mobile business’ operating loss widened 12 percent, to US$206 million.
Overall, Lenovo reported a profit of US$173 million, up 64 percent from the same period a year ago, when profits were impacted by restructuring costs. In the most recent quarter, the company drove down operating expenses 17 percent to US$1.3 billion, and pocketed US$132 million on the sale of an office property in Beijing.