5 Things To Know From Lenovo's 'Solid' Q2 Results

On The Rebound?

It's been a challenging time at Lenovo on a number of fronts, but the most recent quarter offered signs that the company is starting to bounce back. Lenovo reported what it termed "solid" results for its fiscal 2018 second quarter, ended Sept. 30, with major gains over its lackluster fiscal first quarter. The company "continued to make progress in transforming our business" during Q2, Lenovo Chairman and CEO Yang Yuanqing (pictured) said in a news release, with the firm's data center and PC businesses turning out respectable results in the quarter.

The quarterly report followed Lenovo's disclosure in October that it would lay off about 2 percent of its workforce, as part of an effort to become more cost-efficient and focus on key growth areas. Lenovo has been hit hard by increases in memory and component costs, and controversial recent moves have included a reduction in back-end rebate payments.

What follows are five key things to know about Lenovo's second-quarter results.

Quarterly Revenue Surpassed Expectations

Lenovo reported that its fiscal 2018 second-quarter revenue reached $11.8 billion, an increase of 5 percent compared with the same period a year earlier. That was well above a consensus of analyst estimates, which had pegged the figure at $11.3 billion.

The results were also substantially better than Lenovo's first-quarter revenue—an 18-percent jump over the first-quarter sales of $10 billion. Revenue had been flat year over year during the first quarter, as well.

Lenovo pointed to growth in all three of its core businesses—data center, PC/smart devices and mobile—in announcing the quarterly results.

Profits Rebounded From The Prior Quarter

During Lenovo's fiscal first quarter, profits had vanished as the company reported a $72 million loss—its first quarterly loss in nearly two years. But Lenovo reversed course in the second quarter, as net income reached $139 million. But while the second-quarter results were a major improvement over the prior quarterly period, they still represented a year-over-year decline in net income of 11 percent, showing Lenovo still has some ground to make up in the profitability department.

Data Center Sales In North America Were A Bright Spot

Lenovo's Data Center Group--which includes offerings such as servers, storage and networking—helped drive the company's growth during the fiscal second quarter with a 10 percent revenue gain in North America over the same period a year earlier. In a news release, Lenovo Chairman and CEO Yang Yuanqing said that in the data center business, "our transformation is taking effect with a strengthened sales force, new global channel structure and programs, and new product competitiveness."

The PC Division Grew Steadily In Q2

Revenue in Lenovo's PC and Smart Devices business group was up 7 percent during the fiscal second quarter compared with a year earlier, suggesting some stabilization coming to the company's PC business, which has slipped behind HP in terms of global market share. The PC division improved significantly over the fiscal first quarter as well, with a 20 percent increase in sales quarter over quarter. Lenovo cited an "improved product mix which led to the quarter's improved results" in PCs, tablets and smart devices, according to the news release. Recently debuted models include the Yoga 920 laptop, while Lenovo said the fifth-generation ThinkPad X1 Carbon has been particularly popular.

Lenovo Is Targeting PC Share Gains With Fujitsu Deal

In tandem with the second-quarter financial results, Lenovo said it has reached an agreement to acquire a controlling, 51 percent stake in Fujitsu's PC unit, Fujitsu Client Computing Limited. Lenovo has agreed to pay about $157 million up front as part of the deal, with additional payments expected in the future based on performance. Products released by the Japan-based company will continue to be branded under the Fujitsu name, but will help Lenovo with much-needed growth in the crucial PC category. HP captured 21.8 percent of global PC market share during the most recent quarter, with Lenovo trailing in second place at 21.4 percent, according to Gartner. By comparison, a year earlier, Lenovo had led with 21 percent of the PC market to HP's 20.1 percent.