Profits Return, But Sales Slip: 5 Key Takeaways From Lenovo's Latest Financial Results

The More Things Change

Facing intense competition from Dell EMC, HPE, HP Inc. and data center upstart Huawei, Lenovo is busy remaking its executive leadership team and channel program as it pushes ahead with plans to do battle on the software-defined front and prove itself as a bona fide global data center player.

The reinvention is coming two years after the company admittedly mishandled integration of IBM's x86 server business, and the company is now coming off of several quarters of sales declines and seemingly constant change in its executive ranks.

Lenovo, which does nearly 90 percent of its business through the channel, says it now has a firm foundation for its data center business, as well as a stable executive team able to push the company into growth mode and take on the industry's biggest data center players. The company posted a profit for both its full fiscal year and its fiscal fourth quarter ended March 31. However, its quarterly sales fell 4 percent amid a PC market that continues to contract and steep declines in its data center business.

Here are five things solution providers should know about Lenovo's financial position today.

Data Center Group Takes Another Hit

Lenovo spent $2.3 billion on IBM's x86 server business about two years ago but has struggled to formulate a cohesive sales strategy for the data center. That strategy begins now, the company says, but in the meantime, its Data Center Group saw fourth quarter sales decline nearly 14 percent to $850 million. Full year sales fell nearly 11 percent to $4.1 billion and booked a $343 million loss.

Mixed Results In PCs, Smart Devices

Lenovo's PC and Smart Devices group saw fourth quarter sales climb nearly 5 percent year-over-year to $6.7 billion. That was tempered, however, by a year-over-year profit decline of about 4.7 percent and full-year sales that were down 2.3 percent. The global PC market sunk to a 10-year low in shipments in the calendar first quarter, according to research firm Gartner Inc. Lenovo said PC shipments for the year were down about 1 percent compared to a 3 percent decline for the market as a whole.

Mobile Moves Up, And Down

The Mobile Business Group, which includes the Moto business Lenovo bought from Google in late 2014 for nearly $3 billion, as well as Lenovo-branded smartphones, grew nearly 20 percent outside China in the fourth quarter, hitting $1.7 billion in sales in the period. The company said smartphone shipments were up more than 17 percent to 11.3 million units outside China. Still, the mobile business booked a full-year loss of $566 million.

Sales Grew In The Americas

Lenovo said sales in the Americas market, where it faces significant challenges at the hands of Dell EMC and HPE, grew 8.2 percent to $2.9 billion. That counts for more than 30 percent of the company's total sales for the quarter. The U.S. is a key battleground for Lenovo, but in the most recent quarter, the PC market here was dominated by HP Inc., which was the only major PC vendor to see growth in shipments during the period.

Sales Slip In China

On its home turf in China, Lenovo's fourth quarter sales declined 3 percent to $2.3 billion. Full-year sales were also down nearly 5 percent to $11.8 billion. The declines come on the heels of calendar first quarter server marker results that showed Chinese server upstart Huawei taking share from Lenovo in the server market.