More software with hardware

The company is aiming for the next big opportunity, as the scenario-based solutions market continues to grow, Lenovo expands from smart devices to smart space

Revenue

Rs 142,802 mn

It is a $70 billion revenue global technology powerhouse and a Fortune Global 500 technology company. It serves customers in 180 markets and is fuelled by about 30 manufacturing facilities. And it has a rich portfolio of everything one can need under the sun - tablets, monitors, accessories, smartphones, smart home and smart collaboration solutions, augmented and virtual reality (AR/VR), commercial Internet of Things (IoT), software, services, and smart infrastructure data center solutions, including a water-cooling technology for high performance computing (HPC) environments. Let’s see what makes it cool in 2022 and how well is this portfolio growing.

Report Card

Lenovo India is sprinting ahead with a revenue jump of around 14 per cent quarter over quarter to $648M across all Lenovo businesses in India in Q2 FY22-23. It has grown sales by 39 per cent to Rs 14,484 crore in 2021-22 while net profit went up by 215 per cent to Rs 186 crore. This is as per media reports derived from latest regulatory disclosures.

Overall group performance shows that its Second quarter net income grew six per cent year-on-year to $541 million and Group revenue grew to $17.1 billion, up three per cent year-on-year in constant currency. It net income was $541 million. There was strong performance with both the solutions and services business, as well as the infrastructure business, seeing high double-digit year-on-year growth – as per the company’s reflection.

Non-PC businesses make up more than 37 per cent of total group revenue. Commitments continued on doubling investments in Research and Development (R&D) in the medium-term - having grown R&D spending 15 per cent year-on-year in the quarter.

When we look at Q2 FY22/23 performance, in the last quarter, Solutions and Services Group (SSG) has shown good momentum. SSG revenue grew by 26 per cent year-on-year. Interestingly, revenue from non-hardware-tied solutions and services accounts for more than half of SSG’s business – for the first time. There was a revenue of $2.6 billion, up 33 per cent year-on-year, with operating profit reaching an all-time high of $36 million. The Cloud Service Provider and Enterprise/SMB segments both outgrew the market forecast. Revenue from Edge Computing almost quadrupled and Storage more than doubled year-on-year.

The Intelligent Devices Group (IDG) is making a new turn with the rise of digital forces. IDG maintained industry-leading profitability of 7.4 per cent, and as the company explains, it is driven by operational excellence and consistent investments in innovations, particularly in the high value-added premium segments.

In India too, its focus is on ‘pocket-to-cloud’ architecture. The company has shared that all main businesses contributed positive operating profit, while diversified growth engines continued to drive strong performance. The solutions and services business, as well as the infrastructure business, exhibited high double-digit year-on-year growth.

Key offerings and investments

At the Tech World ’22, Lenovo demonstrated its pursuit of real-world applications and the Metaverse. It showed new concepts, solutions, and emerging innovations that will define the way we work, learn, and engage in the digital world. It also showcased some new form factors, like - rollable proof of concepts for the smartphone and PC and immersive telepresence technology ‘Cyber Spaces’.

The company also has an enterprise play with Managed Services and Device-as-a-Service (DaaS) offering. It has identified that this trillion-dollar IT services market continues to grow steadily, with faster growth to be expected in DaaS (Device as a Service), Managed Services for data center, as well as Cloud and Edge Environment through 2025. It also sees the market for vertical solutions and services spending staying strong, specially in smart education, smart retail, smart city, and smart manufacturing.

It is swiveling towards New IT – client, edge, cloud, network, and intelligence – staying in sync with the global trends of digitalization and intelligent transformation.

The company also aims for the next big opportunity. By 2025, the server market alone is expected to reach $134 billion. In the same time frame, the edge infrastructure market will grow over 21 per cent CAGR to reach $47 billion, and the storage market will exceed $36 billion. PCs might have been its cash cow, but moving ahead, the scenario-based solutions market will continue to grow as Lenovo expands from smart devices to smart spaces.

With these efforts and investments, the company seems to have all the intent to plug into ‘what’s coming next’. The next year is about to switch on, and there would, hopefully, be a lot to flip.

Key Partnerships and Impact Areas

• Partnered with VMwarefor Edge and Cloud Innovation Labs

• In September 2022, it brought a VR headset engineered for the enterprise Metaverse

• SSG’s Digital Store solution has been embedded with Lenovo AI Edge Server - powering one of the world’s largest food retailers to reduce over 75 per cent of its self-checkout errors without the need for employee intervention

• The newly formed Lenovo PCCW Solutions was launched in August 2022 and achieved initial success with business synergies

Development of SSG’s portfolio of sustainability offerings showed continued progress - with the CO2 offset services extended to more products. CO2 Offset Services were extended to select Lenovo ThinkSystem servers

• Since its launch in 2021, the take-up rate of Lenovo’s CO2 Offset Services has been on the rise, as claimed by the company - with the amount of carbon offset by customers increasing by double-digits quarter-on-quarter

• Joined 321 Coffee that employs people with intellectual and developmental disabilities for accessible technology

Shailendra Katyal

Managing Director, Lenovo

By Pratima H

pratimah@cybermedia.co.in