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Lenovo is sponsoring Olympic athletes from around the
world who are training to compete in the 2008 Olympic
Games in Beijing.
14 Lenovo Group Limited • Annual Report 2007/08
BUSINESS REVIEW
Lenovo made significant progress against its goal of
growing faster and more profitably than the industry during
the 2007/08 fiscal year. Lenovo’s financial performance was
outstanding thanks to solid execution of its key initiatives,
including rolling out the transaction model in additional
geographies, improving global supply chain, enhancing
competitiveness in desktop computers, and building a
global brand.
During the fiscal year, Lenovo achieved faster than industry
growth in both PC shipments and sales, with solid
performance in both the China PC market and the large
enterprise business outside China. It also made significant
inroads into emerging markets as well as the small- and
medium-sized business (SMB) and consumer markets,
through the roll-out of the transaction business model
outside China. For the fiscal year ended March 31, 2008,
Lenovo increased its worldwide PC shipments by
approximately 22 percent, healthily outpacing the industry
average growth of 16 percent.
In order to allow the Group to better focus on its core PC
business, Lenovo completed the sale of its entire interest in
its mobile handset business in March 2008. The Group
recorded approximately US$65 million as a pre-tax gain on
disposal. Lenovo’s continuing business (excluding mobile
handset business) improved strongly in its financial
performance. During the 2007/08 fiscal year, Lenovo’s sales
grew 17 percent year-on-year to approximately US$16,352
million. The gross profit margin for the year improved to
15.0 percent from 13.5 percent. The Group’s profit before
taxation (excluding the cost of strategic restructuring
actions) for its continuing operations surged 237 percent to
approximately US$560 million with pre-tax operating
margin improved to 3.3 percent from 1.2 percent in the
previous year. Including the net profit of US$20 million from
discontinued operations, the Group’s profit attributable to
shareholders increased significantly by 201 percent year-
on-year to US$484 million this year.
Performance of Geographies
Lenovo’s improvement in market competitiveness
positioned it to take advantage of a rising PC market and
deliver a solid year across all geographies. All of the
Group’s geographies posted double-digit PC shipment
increases and were profitable for the year. During the year
ended March 31, 2008, Lenovo gained 0.4 percentage
points in market share, accounting for approximately 7.6
percent of the overall market, making it the number four
company in the worldwide PC market.
Greater China: Lenovo Greater China continued to be
the largest contributor to the Group’s overall sales,
accounting for approximately 37 percent in the 2007/08
fiscal year. The PC market in China enjoyed another year of
robust growth on the back of continuous strong economic
growth in the country, which increased disposable income,
as well as increased rates of notebook adoption. Building
on the market traction of its well-established dual business
model in China, the success of Olympic marketing, and
continuous improvement in market coverage, the Group
recorded approximately 27 percent growth in PC unit
shipments during the fiscal year. Lenovo increased its share
of the China market to 28 percent, leading the world’s
second largest PC market for 11 consecutive years.
MANAGEMENT’S DISCUSSION & ANALYSIS