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Lenovo’s chairman says worst is over

by on07 January 2019

We are about to reap rewards of ‘intelligent transformation’

China’s Lenovo Group has begun to see some rewards from the multibillion-dollar acquisitions of IBM’s commodity server business and Google’s Motorola Mobility smartphone unit

Chairman and chief executive Yang Yuanqing talking to the China Post said that the worst is over for Lenovo, which has spent the past few years refocusing on mobile and smart devices, as well as its data centre services.

Dubbed “intelligent transformation” Lenovo wanted to capitalise on the rapid growth of the internet of things (IoT) market globally, as well as the wider adoption of artificial intelligence (AI) and automation.

It seems to have paid off with the company recently regaining the crown from HP as the world’s biggest personal computer (PC) maker.

The company in November posted a third, straight quarter of profit growth as its Motorola business broke even operationally and as its data centre unit posted much-reduced losses of $3 million, allowing it to say it was on track to be a “sustainable, profitable growth engine”.

“Because of the past few years of laying the groundwork … we have all the assets needed to now push ahead in the field of automation [where processes can be conducted with minimal human inputs]”, Yang said,

Lenovo now has its paws on gear which can handle big data and powerful algorithms that can parse the information – generating applications for the medical, manufacturing and retail industries among others.

This was developed during the company’s long-haul transformation from a plain vanilla distributor of foreign PC brands in China, to a manufacturer, to expanding overseas via the acquisition of IBM’s PC business in 2005.

Lenovo had problems with a couple of 2014 acquisitions – Google’s Motorola for US$2.9 billion and IBM’s low-end server unit for US$2.3 billion.

The traditional server business market crashed immediately after Lenovo got into it as cloud computing took off. With the benefit of hindsight, Yang said Lenovo acquired an “infrastructure” business that was not “smart”, with cloud computing quickly replacing traditional IT architecture due to its power and efficiency.

With servers, networks and applications now defined by software, the devices and applications layer can be decoupled from the underlying infrastructure and hardware, allowing for servers, networks and storage space to be shared, said Yang.

Yang said that getting rid of redundant assets and upgrading others has been Lenovo’s major challenge over the past few years. “We have been building new foundations over the past two years”, he said.

The company’s data centre group (DCG) registered its fourth straight quarter of strong revenue growth in the three months ended September 30, as pre-tax losses decreased over the previous quarter.

And its mobile business has finally escaped from a rut, according to Yang, thanks to cost cutting efforts and exits from some markets.

Last modified on 07 January 2019
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