Lenovo Posts Strong Earnings, and the Week in Daily Updates

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Lenovo Posts Strong Earnings

Lenovo had another good quarter, capping off a strong year. From Reuters:

China’s Lenovo Group Ltd, the world’s fourth-biggest smartphone vendor, saw net profit grow 29 percent for the business year ended March, as strong smartphone sales helped shore up weak growth in China.

Lenovo is expanding into smartphones to offset a decline in its once-mainstay personal computers (PC) as consumers switch to mobile devices, to the extent that it agreed in January to buy the Motorola Mobility smartphone unit of Google Inc for $2.9 billion.

Actually, it’s their PC sales I find most interesting – they were actually quite strong (as they have been for several years running). From the Lenovo press release:

Lenovo expanded its number one position in PCs, adding 2.1 points of market share to post a record 17.7 percent total share for the full-year, representing five percent year-over-year growth, compared to an overall industry decline of 8 percent during this same period. Even while China’s PC market slowed, Lenovo’s operating profit in China PC improved by 1 percentage point. Asia Pacific had record share of almost 15 percent, while improving profitability. For the first time, Lenovo’s EMEA revenue surpassed its China PC revenue in the quarter, while in the US, Lenovo surpassed Apple to take the number three position in PC shipments in the fourth quarter. With 20 consecutive quarters of outgrowing the PC market, Lenovo continued to show it can post rapid growth in absolute shipment and in relative market share metrics, even in difficult markets.

Lenovo is such an interesting company because their strategy is in many ways the exact opposite of most other manufacturers; the conventional wisdom is that you seek a growing market, because it’s easier to win new customers than it is to steal customers from your competitors. Lenovo, though, takes the opposite tack. They look for mature non-growth – or shrinking – markets, and specialize in stealing share from the incumbents.

What is particularly interesting is that they accomplish this strategy with a much more integrated model than many of said competitors. While it’s true they use 3rd-party OSs (which is great for them, because they have compatibility), they keep almost all design and manufacturing in-house, unlike companies like Dell or HP. This then enables Lenovo to focus on all kinds of innovative designs that fill particular niches (helping them to steal share), even as they use relentless discipline and mature technology to keep their costs low.

Lenovo is, in my opinion, absolutely the company to keep your eye on when it comes to smartphones; in many respects the smartphone marketplace is increasingly right in their sweet spot, and I expect them to seriously challenge Samsung for overall market share sooner rather than later.

The full list of topics covered this week in the Daily Update include:

  • AT&T Buying DirecTV
  • Google Buying Twitch
  • Facebook Building Snapchat Competitor
  • GoPro Files for IPO (I expanded on this item at Bloomberg View2)
  • Angela Ahrendts and Apple Retail
  • Groupon Launches iPad Checkout System
  • Lenovo’s Earnings
  • Windows 8 Banned in China
  • Google Buys Divide
  • JD.com Prices IPO
  • Google’s SEC Letter
  • Patent Reform Dies
  • Facebook Changes Privacy Policy
  • Microsoft Channels to Sell Azure
  • The Problem with IBM

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  1. There is also an access option for $30 per month/$300 per year which gives you access to me personally to ask about the topic of your choosing, a private message board, and virtual and in-person meetups 

  2. I didn’t choose the headline