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Lenovo posts massive profit loss for Q2
CHINA'S LENOVO reported a 78 drop in profit for its second fiscal quarter of 2008 today, compared with Q2 last year.
The world's third-largest PC manufacturer after HP and Dell, Lenovo said its worldwide PC shipments grew 7.4 per cent over the same period last year. The company said that its unit shipments growth lagged that of the rest of the PC industry due to weaker commercial and public sector demand in the China market.
Quarterly sales totaled $4.3 billion and were flat, year over year. Gross profit margin was 12.6 per cent. Second quarter EBITDA was $107 million, and pre-tax income came to $39 million, net of a $24 million restructuring charge.
Shareholder earnings were $23 million for earnings per share of 0.27 cents, down 78 per cent from $105 million and 1.22 cents per share in the same quarter of last year. The company reported $1.5 billion in cash reserves.
In the Greater China region, Lenovo reported sales of $1.9 billion, up 11 per cent from the second quarter 2007 on 12 per cent growth of PC shipments. Lenovo leads in the Chinese PC market with 29.2 per cent marketshare. China accounted for 44 per cent of global sales.
In the Americas region, Lenovo posted sales of $1.1 billion, down 4 per cent from last year. Sales in the Americas were 25 per cent of Lenovo's worldwide sales in the second quarter.
In Europe, the Middle East and Africa (EMEA), Lenovo's sales were $890 million, up 18 per cent year over year and 20 per cent of global sales.
In the Asia Pacific region excluding China, Lenovo booked sales of $467 million, down 10 per cent year over year, a drop the company attributed to poor execution in Japan and India during the quarter. Asia Pacific accounted for 11 per cent of sales globally in the quarter.
"Due to the impact of the global economic downturn, and a shortfall in the execution of our strategic plan, Lenovo's performance in the second quarter did not meet our expectations," Lenovo Group Chairman Yang Yuanqing said in a statement.
Lenovo President and CEO William J. Amelio said, "Under these adverse market conditions, balancing growth and profitability are equally critical. This means that we must respond by aggressively pursuing growth opportunities while continuing to manage our operating structure even more efficiently." µ
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Lenovo buys IBM's PC division, lays off thousands and moves much of the work to China. Then Lenovo sees huge sales declines while IBM sales remain strong. Consumers have voted with their dollars. Quality matters and people do not want Chinese junk.
Ever since Lenovo acquired IBMs PC business, it's been silently dropping crucial "Think" Features from it PCs and focussing more on making fashion devices like the TNPC (Taiwan New PC consortium), and other less prominent PC makers. IBM's "Think" features are what drives IBM's enterprise sales, and sales to anyone who needs their PCs for real work, instead of a device that looks good in a coffeee shop.
What are these features that Lenovo has been dropping? Universal docking--it is a big thing that earlier Thinkpads has nearly universal docking capabilities: A worker with a thinkpad can bring his thinkpad to his home, his office, to Bud's desk in Chicago, and Sam in New York and use his Dock and office setup. He could also have multiple thinkpads and a docking station at home and work. Enterprise system management built into the board--lenovo has placed less emphasis on this than IBM. Multiple monitor support--now that this is becoming popular, Lenovo appears to be dropping these features. The T30 and T43 (ATI Graphics) supported multiple monitors with a port replicator outside the box, the X60, X61, X200, and X200 do not, and have no expansion card equipped docking option. At the very least, Lenovo should mass produce an ExpressCard Dock for these machines--at least these would be backward compatible with the T43 and later machines.
And Thinkpads have to stay as a Thinkpad.