Lenovo Looking To Have The Last Seat When The Music Stops
Stephen Simpson, CFA • 10 Comments
Stephen Simpson, CFA • 10 Comments
Lenovo Facing Headwinds, But Managing Them Well
Stephen Simpson, CFA
Stephen Simpson, CFA
Lenovo's Strong Operating Results Likely Won't Quiet The Doubters Yet
Stephen Simpson, CFA
Stephen Simpson, CFA
Thu, May 26, 4:31 AM
Tue, Apr. 12, 2:09 AM
- According to research firm Gartner, global shipments of personal computers fell 9.6% to 64.8M units during Q1, marking the sixth consecutive quarter of declines and the first time since 2007 that shipments dropped below 65M units (IDC reported similar results worldwide).
- In the U.S., PC shipments totaled 13.1M units, representing a 6.6% decline from a year earlier and the lowest volume in three years.
- The sector has faced headwinds in recent quarters which include an economic slowdown in China, the strong U.S. dollar and the growing popularity of smartphones.
- Related stocks: OTC:ASIYF, AMD, HPQ, INTC, OTCPK:LNVGY, MSFT, MU, NVDA, SNE, STX, OTCPK:TOSYY, WDC
Fri, Mar. 18, 10:57 AM
- As part of a broad restructuring, Rick Osterloh is stepping down as head of Lenovo's (OTCPK:LNVGY) Motorola Mobility unit. Osterloh was Motorola's chief since April 2014 (prior to Lenovo's October 2014 acquisition of Motorola from Google).
- The Motorola teams previously reporting to Osterloh will now report to Aymar de Lencquesaing, one of the newly-appointed co-presidents (along with fellow Lenovo exec Xudong Chen) of Lenovo's Mobile Business Group (MBG). IDC estimates Lenovo proper and Motorola shipped 74M smartphones in 2015, good for a 5.2% global share (#4 behind Samsung, Apple, and Huawei).
- Lenovo is also restructuring its PC Group into a PC & Smart Device Business Group responsible for "delivering PCs, detatchables, tablets, phablets, gaming and smart home products across Windows, Chrome and Android based products."
- The Enterprise Business Group, which includes IBM's former x86 server unit, will now be known as the Data Center Group (DCG), with DCG president Gerry Smith now reporting to Lenovo CEO Yang Yuanqiang. And Lenovo's Ecosystem and Cloud Services Group has been turned into the Lenovo Capital and Incubator Group that will focus on "developing new, innovative technologies through Lenovo spinoffs or investments in standalone startups, while continuing to develop Lenovo’s overall cloud and big data platform."
Wed, Mar. 9, 1:54 PM
- Looking to better compete against common rivals such as Cisco, HP, and Dell, Juniper (JNPR +1.5%) and Lenovo (OTCPK:LNVGY) have struck a global reseller deal and product-integration partnership encompassing each company's data center hardware lineups.
- Some of the elements of the deal: 1) Companies will be able to buy Juniper's networking hardware from Lenovo, which bought IBM's x86 server unit in 2014. 2) Juniper and Lenovo plan to develop "simplified" data center management and orchestration tools using the latter's Network Director and Contrail SDN software, and the former's xClarity management software. 3) The companies plan to develop "go-to-market plans and a tailor-made resell model to address unique localization requirements in China."
- The deal is also said to cover hyper-converged (integrated server/storage/networking) and hyper-scale data center hardware - EMC, Cisco, HP, Dell, and Oracle are all going after the hyper-converged market, while many Internet companies (as well as some enterprises) have embraced hyper-scale data center architectures.
- Juniper's enterprise revenue rose 8% Y/Y in Q4 to $386.4M, and accounted for 29% of its total revenue. News of the Lenovo deal comes a week after Cisco (NASDAQ:CSCO) unveiled a refresh for its Nexus data center switch line, as well as new switch ASICs (referred to as Cloud Scale) said to deliver unmatched performance and latency.
Wed, Mar. 2, 4:58 AM
- IBM plans to sell up to $150M worth of shares in China's Lenovo (OTCPK:LNVGY), according to Reuters, which cited a term sheet of the deal sent to investors.
- IBM will offer 182M shares in an indicative range of HK$6.26-HK$6.42 each, equivalent to a discount of up to 6.4% to Lenovo's closing price on Wednesday.
- Goldman Sachs was hired as sole bookrunner for the deal.
Wed, Feb. 3, 5:58 AM
Tue, Jan. 12, 5:56 PM
- IDC estimates global PC shipments fell 10.6% Y/Y in Q4 to 71.9M, just a slightly smaller drop than Q3's 10.8%. Gartner is once more a little less downbeat, estimating shipments fell 8.3% to 75.7M.
- For the whole of 2015, IDC estimates shipments fell 10.4% to 276.2M. The firm notes adding detachable tablets to its count would respectively provide ~6% and ~3% boosts to Q4 and 2015 growth rates.
- The Q4 figures suggest Windows 10 (available as a free upgrade to Windows 7/8 users) and Intel's (NASDAQ:INTC) Skylake CPU launch provided only a modest sales lift. IDC: "The PC market continued to face persistent challenges [in 2015] from longer-PC lifecycles and competition from mobile phones and tablets, despite the slowing growth in those markets. However, economic issues like falling commodity prices and weak international currencies, as well as social disruptions in EMEA and Asia/Pacific that disrupted foreign markets were a larger factor for 2015."
- IDC VP Loren Loverde still thinks PC replacement rates will pick up in 2016. "Commercial adoption of Windows 10 (NASDAQ:MSFT) is expected to accelerate, and consumer buying should also stabilize by the second half of the year. Most PC users have delayed an upgrade, but can only maintain this for so long before facing security and performance issues." Counting detachable tablets, IDC expects 1%-2% 2016 growth. Gartner forecasts a 1% decline.
- Lenovo (OTCPK:LNVGY) remained the PC market's top player: IDC estimates Lenovo's shipment share rose 140 bps Y/Y in Q4 to 21.4%. #2 HP's (NYSE:HPQ) share rose 10 bps to 19.9%. #3 Dell's rose 70 bps to 14.1%.
- Apple (NASDAQ:AAPL) and Asus (OTC:AKCPF) were tied at #4 with 7.9% shares - Apple's share rose 110 bps, and Asus' 90 bps. Apple's revenue share could be closer to 15%. Non-top 5 vendors, hurt by their relative lack of scale, collectively saw their shipment share drop 420 bps to 28.7%
- Related tickers: NVDA, AMD, MU, STX, WDC
Nov. 12, 2015, 11:39 AM
- Lenovo (OTCPK:LNVGY) rose 5.8% in Hong Kong after reporting FQ2 revenue of $12.2B, up 16% Y/Y (23% exc. forex) thanks to the Motorola Mobility acquisition (closed in Oct. 2014) and beating an $11.8B consensus. Shares were down 29% YTD going into earnings.
- The company officially posted a $714M net loss (slightly below an $803M consensus), but had pre-tax income of $166M after backing out $599M in restructuring costs, a $324M smartphone inventory charge, and $85M in various non-cash charges.
- A weak PC market led PC division sales to drop 5% Y/Y to $8.1B, with division op. income falling 17% to $406M. Enterprise sales rose 5.5x to $1.2B thanks to the acquisition of IBM's x86 server unit, which contributed $900M.
- Mobile sales rose 104% to $2.7B thanks to the Motorola deal. Motorola had revenue of $1.4B, down from $1.69B a year ago as part of Google. The entire mobile division had an op. loss of $217M. Thanks in part to Motorola, 70% of FQ1/FQ2 shipments came from outside of China, up from 19% a year earlier.
- Chinese sales totaled $3.3B (now just 28% of total revenue), Asia-Pac $2B, EMEA $3.2B, and the Americas (significantly boosted by M&A) $3.7B. Chinese mobile sales were pressured by "hyper competition, carrier subsidy cuts and continued shift to the online model." India (revenue +99% Y/Y) was a strong point. "Our first priority is to grow in the rest of the emerging markets," says CEO Yang Yuanqing.
Oct. 8, 2015, 5:23 PM
- IDC estimates global PC shipments fell 10.8% Y/Y in Q3 to nearly 71M units, a drop nearly as large as Q2's 11.8% and above a 9.2% projection. Gartner estimates shipments fell 7.7% to 73.7M.
- IDC: "Across many regions, the channel remained focused on clearing Windows 8 inventory before a more complete portfolio of models incorporating Windows 10 (NASDAQ:MSFT) and Intel (NASDAQ:INTC) Skylake processors comes on the scene ... Though easing a bit, currency devaluation continued to inhibit PC shipments in the third quarter. While Windows 10 has generally received favorable reviews and raised consumer interest in PCs, many users opted to upgrade existing PCs rather than purchase new hardware."
- Nonetheless, IDC is "optimistic" about a demand pickup. "While PC shipments will be hampered in the short run by the availability of a free upgrade to Windows 10, the improved PC experience across user segments should drive longer-term demand for new PC hardware..."
- Likewise, Gartner expects "more stable market conditions" in 2016. It's also pleased the U.S. notebook and "premium ultramobile" segments saw positive growth. Various analysts have reported seeing signs of stabilizing PC demand.
- With tablet sales also under pressure, tablet cannibalization is less of an issue than before. The ability of older PCs to handle mainstream computing tasks without trouble (including on Windows 10) may be a bigger problem. Many in the industry are hoping 4K video and/or virtual reality will fuel upgrades.
- The market's four biggest players all grabbed share from smaller firms with less scale. IDC estimates market leader Lenovo's (OTCPK:LNVGY) unit share rose 130 bps Y/Y to 21%, #2 HP's (NYSE:HPQ) 110 bps to 19.6%, and #3 Dell's 120 bps 14.3%.
- Apple (NASDAQ:AAPL), aided by 1H15 MacBook refreshes, came in at #4 with a 7.5% share, up 60 bps (revenue share is likely closer to 15%). A 4K 21.5" iMac is reportedly launching next week.
- Acer (OTC:ASIYF) rounded out the top-5 with a 7% share, down 150 bps. Everyone else collectively fell 270 bps to 30.6%.
- Related tickers: AMD, NVDA, STX, WDC, HTCH
Sep. 2, 2015, 7:22 PM
- Ahead of the IFA electronics show (runs from Sep. 4-9 in Berlin), Sony (NYSE:SNE) has launched its Xperia Z5 phone line. The flagship model, the 5.5" Z5 Premium, is the first phone to sport a 4K display (overkill?). The standard Z5 has a 5.2" 1080p display, and the Z5 Compact a mere 4.6" 720p display.
- Sony, looking to stand out in a very competitive high-end Android market, is also emphasizing the phones' cameras: They have 23MP resolutions, 24mm lenses, F2.0 apertures (good for low-light shots), and a "ground-breaking" auto-focus speed of 0.03 seconds. They run on Qualcomm's Snapdragon 810 processor.
- Huawei, trying to make greater high-end inroads, has launched the Mate S, a 5.5" phone with a 1080p display, metal body, and 13MP camera with optical image stabilization. It will retail for a steep €650 ($728).
- Lenovo (OTCPK:LNVGY) is going off the beaten path. The company has launched the Phab and Phab Plus, two near-7" devices whose size arguably makes them tablets more than smartphones. Also launched: The Vibe P1, a phone with a 5" 1080p screen and massive 5,000mAh battery; the Vibe P1m, which has a 5.5" 720p screen, and a relatively modest 4,000mAh battery; and the Vibe S1, which has two front cameras to enable selfie shots with depth effects.
- Meanwhile, Lenovo's Motorola Mobility unit has refreshed its Moto 360 smartwatch lineup. 42mm and 46mm men's versions are offered, along with a 42mm women's version. The watches sell for $300-$430.
Aug. 31, 2015, 2:49 AM
- The combined effects of China's economic slowdown, a maturing smartphone industry and market volatility are sending jitters through Asian electronic-parts suppliers, which have long-relied on Chinese manufacturing muscle and consumer demand to power growth.
- Earlier this month, research firm Gartner said smartphone sales in China fell for the first time in Q2, while IDC forecasts smartphone shipments in the country to grow just 1.2% this year, down from 19.7% in 2014.
- Related tickers: SNE, OTC:SSNLF, OTC:HNHAF, OTC:PGTRF, OTCPK:SHCAY, OTCPK:LNVGY, OTC:HTCXF, OTC:FXCOF, OTCPK:PCRFY, OTCPK:BYDDY, OTC:HXSCF, OTCPK:TOELF, OTCPK:FANUF
Aug. 13, 2015, 2:56 AM
- After reporting a 51% slump in fiscal Q1 earnings, Lenovo (OTCPK:LNVGY) said it will cut 5% of its workforce and restructure, continuing the integration of its two recent acquisitions.
- Lenovo bought both Motorola Mobility and IBM's low-end server unit last year, but it has been struggling with them due to China's saturated smartphone market and slowing global demand for personal-computers.
- Lenovo -9% in Hong Kong.
Jul. 9, 2015, 10:02 PM
- IDC estimates global PC shipments tumbled to 66.1M in Q2, falling at a sharper Y/Y clip than Q1's 6.7% and about 1% faster than expected. Gartner is slightly less harsh, estimating shipments fell 9.5% to 68.4M.
- Factors blamed for the decline: Inventory reductions ahead of the Windows 10 launch (set for July 29), a strong dollar (has led to higher overseas prices), and tough Y/Y comps caused by the 2014 boost in business PC sales caused by the end of Windows XP support. With tablet sales under pressure as well, tablet cannibalization is less of a factor than before ... but rising smartphone/tablet usage still appears to be taking a toll on PC upgrade rates.
- Gartner sees full-year shipments falling 4.4%. IDC still expects low-to-mid single-digit declines in 2H15, before volumes stabilize in future years. It sees the Windows 10 launch going "relatively well," but cautions Microsoft's (NASDAQ:MSFT) decision to provide free upgrades to Windows 7/8 users will limit its impact on PC sales.
- Continuing a recent trend, market leaders grabbed share from smaller rivals. IDC estimates #1 Lenovo's (OTCPK:LNVGY) share rose to 20.3% from 19.4% a year ago, #2 HP's (NYSE:HPQ) to 18.5% from 18.2%, and #3 Dell's to 14.5% from 14%. Acer (OTC:ASIYF) and Asus (OTC:AKCPF) are respectively given 6.6% and 6.5% shares
- Curiously, IDC has Apple (NASDAQ:AAPL) ranked #4 globally, with its share rising to 7.8% from 5.9% via 5.1M Mac shipments (could imply a 15%+ revenue share), but Gartner doesn't have the company in its top-5. IDC and Gartner respectively assign Apple 13.5% and 12.7% U.S. shares. In the past, IDC's Mac shipment estimates have been notably different from the quarterly figures Apple would later report.
- Near-term expectations for PC sales are already quite low, following Intel's (NASDAQ:INTC) Q1 warning, AMD's Q2 warning, Micron's (NASDAQ:MU) June 25 results/guidance, and plenty of other negative news. Intel's Q2 report arrives on July 15.
- Other PC industry names: NVDA, STX, WDC, HTCH
Jun. 2, 2015, 7:27 AM
- The head of Lenovo's (OTCPK:LNVGY) mobile business is stepping down less than a year after the Chinese technology giant bought Motorola Mobility to boost its smartphone offerings.
- Liu Jun will be replaced by Chen Xudong, the head of ShenQi, a sub-division that sells mobile devices.
- Lenovo did not offer a reason for Liu's exit but said he would become a special consultant to Chief Executive Yang Yuanqing.
May 11, 2015, 2:17 PM
- After growing 19.1% Y/Y in Q4 (and seeing stronger growth earlier in 2014), Chinese smartphone shipments fell 4.3% in Q1 to 98.8M units, per IDC. Higher penetration rates, carrier subsidy cuts, and an inventory buildup near the end of 2014 contributed to the drop.
- IDC: "China is oftentimes thought of as an emerging market but the reality is that the vast majority of phones sold in China today are smartphones ... convincing existing users as well as feature phone users to upgrade to new smartphones will now be the key to further growth in the China market."
- Analysts have already noted Chinese smartphone demand has softened. Demand is expected to improve in 2H15, as inventories are cleared and 4G phone sales continue growing. IDC expects "relatively flat" growth for the whole of 2015.
- With strong pent-up demand for larger iPhones providing a lift, IDC estimates Apple's (AAPL -0.9%) share rose to 14.7% (#1 overall) from 12.3% in Q4 and 8.7% a year ago, via 14.5M shipments (+62% Y/Y). Revenue share was likely well over 30%, given sub-$150 Android phones account for a large portion of local sales. Apple, for its part, has reported its Greater China revenue (iPhone or otherwise) rose 71% Y/Y in Q1 to $16.8B (29% of total revenue).
- Xiaomi continues growing rapidly: IDC estimates its share rose to 13.7% (#2) from 9.2% a year ago. Fellow local Android OEM Huawei saw its share rise to 11.4% (#3) from 7.8%. Samsung (OTC:SSNLF), however, saw its share fall to 9.7% from 19.9% ahead of the Galaxy S6 launch. Lenovo/Motorola's (OTCPK:LNVGY) share fell to 8.3% (#5) from 10.3%. Everyone else had 42.2% of the market.
Apr. 29, 2015, 6:21 PM
- The WSJ reports AAC Technologies, one of the two suppliers of the Apple Watch's (NASDAQ:AAPL) taptic engine (enables its haptic feedback features) was making defective components, and thus slowed down the ramping of Watch production. No recall is planned, since Apple doesn't believe Watches with the defective part shipped to consumers.
- Apple has reportedly responded by moving nearly all of its taptic engine production to Japan's Nidec, which didn't encounter the same issue. However, the WSJ states "it may take time" for Nidec to up production, and that Apple told some Watch suppliers last week to "slow production until June."
- The report comes as shipping times for many Watch models remain lengthy; a survey from research firm Slice indicated only 22% of U.S. Watch orders were delivered during the first weekend (376K out of 1.7M).
- In its FQ2 10-Q, Apple discloses the European Commission "could require Ireland to recover from the Company past taxes covering a period of up to 10 years," and that such tax payments could be "material." The EC has long been probing the use of Irish legal structures by Apple and other U.S. multinationals to lower their local tax bills; the FT reported last year Apple could receive a fine of up to several billions of euros.
- IDC estimates Apple's 61.2M calendar Q1 iPhone sales were good for an 18.2% global smartphone unit share, up from 15.2% a year ago; revenue share is likely above 40%. Samsung (OTC:SSNLF) had an estimated 24.5% unit share (82.4M shipments), down from 30.7% a year ago. #3 Lenovo (OTCPK:LNVGY) fell to 5.6% from 6.6% after factoring the Motorola Mobility deal.
- Overall, IDC thinks smartphone shipments rose 16.7% Y/Y to 336.5M. The total mobile phone market was roughly flat at 458.9M units.
Lenovo (HKSE: 992) (ADR: LNVGY) is dedicated to building exceptionally engineered personal computers. Lenovo's business model is built on innovation, operational efficiency and customer satisfaction as well as a focus on investment in emerging markets. Formed by Lenovo Group's acquisition of the... More
Industry: Diversified Computer Systems
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