Lenovo earnings reveal the damage COVID-19 can inflict

With its main smartphone manufacturing sites situated in Wuhan, Lenovo has been hit hard by COVID-19, spoiling what would have otherwise been a very productive year.

Group revenues for Lenovo were down 1% to $50.7 billion, though it should be noted that revenues were down 10% year-on-year for the final three months, the period impacted by COVID-19. Across the first three quarters of 2019/20, the business was on the up as you can see below.

Source: Lenovo Investor Relations

With the negatives of the final three months, growth figures were less than attractive, but without the impact of COVID-19 it has been a successful 12-month period.

“Amid one of the most significant periods of global change and transformation we have ever seen, Lenovo significantly transformed its business over the past year,” said Yang Yuanqing, Lenovo CEO.

“I am also unbelievably proud of how we continue to respond to the global pandemic, as both a business and a corporate citizen. While the world continues to face uncertain times, I’m confident Lenovo will leverage its operational excellence and global footprint to continue implementing our intelligent transformation strategy and fully grasp the opportunities our ‘new norm’ provides us.”

Many companies have complained about supply chain issues and disruption to manufacturing operations during this period, but few faced the same complications as Lenovo.

2019/20 had been targeted as a breakthrough year for Lenovo in the mobile segment. During the third quarter results, Lenovo’s mobile business unit boasted of five consecutive period of profitability growth, as well as outperforming the LATAM market on smartphone shipments by 19 points. LATAM is an area Lenovo, through the Motorola brand, has been very successful.

The final quarter put an end to this successful streak as Wuhan, the starting point of the COVID-19 pandemic, is home to Lenovo’s smartphone manufacturing facilities. This was the most heavily impacted segment of the Lenovo business, however its data centre business also declined on softer demand, however PC’s outperformed the market, IOT grew significantly and smart infrastructure grew 37% year-on-year as Network Function Virtualization started to generate revenue.

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