Lenovo 2011 Annual Report Download - page 16

MANAGEMENT’S DISCUSSION & ANALYSIS
2010/11 Annual Report Lenovo Group Limited
18
point year-on-year to an all-time high of 29.5 percent, according
to industry estimates.
Lenovo’s mobile business also continued to post strong
shipments growth of 47.4 percent year-on-year in its first full
fiscal year of reporting following integration into the Group,
compared to its own performance in the previous fiscal year.
It further strengthened Lenovo’s position as the number one
domestic mobile handset brand in China.
Operating profit in China grew to US$507 million during the
fiscal year, but operating margin was 5.1 percent, down from
5.6 percent in the previous fiscal year. Operating margin
was under pressure due to additional marketing expenses
incurred in promoting the newly launched LePhone and LePad.
Operating margin for China PC business was stable at 5.7
percent, unchanged from the previous fiscal year.
Emerging Markets (excluding China)
Emerging Markets (excluding China) accounted for 17.9 percent
of the Group’s total sales.
The Group’s strong growth momentum continued in the
Emerging Markets (excluding China) during the fiscal year.
Lenovo successfully expanded its business scale in the
geography through continued improvement in distribution
channels, a strengthened product portfolio, and new
investments in branding and marketing. The Group’s unit
shipments grew 50.1 percent year-on-year for the fiscal year,
which was about three times the overall market growth of 17.8
percent. Lenovo’s market share increased by 1.3 percentage-
point year-on-year to 6.1 percent, according to industry
estimates. Strong unit shipments growth and share gains
were recorded across all key regions such as RUCIS (+141.5
percent), India (+64.9 percent), ASEAN (+41.1 percent) and
Latin America (+41.1 percent). In some key markets, such as
India, registered double-digit market share in some quarters for
the first time in the fiscal year.
Operating loss in Emerging Markets (excluding China) narrowed
to US$65 million during the fiscal year, against an operating loss
of US$97 million recorded in the previous fiscal year, mainly due
to improved scale.
Mature Markets
Mature Markets accounted for 35.7 percent of the Group’s total
sales.
Capitalizing on the recovering in corporate PC demand,
Lenovo’s Mature Markets successfully returned to profit, and
its operating margin improved in each quarter during the fiscal
year, while unit shipments consistently expanding faster than the
overall market. Therefore, the Group’s overall share in Mature
Markets rose by 1.2 percentage-point year-on-year to 5.5
percent, and it posted gains in most key regions. Most notably,
Lenovo recorded historic high market share in North America
in the fiscal quarter four and Australia and New Zealand (ANZ)
recorded the highest share within Mature Markets.
The Group’s unit shipments in Mature Markets grew 27.4
percent year-on-year during the fiscal year against a 0.2 percent
decline in the overall market. Unit shipments in North America,
Western Europe, Japan and ANZ increased by 31.8, 22.8, 40.2
and 6.3 percent year-on-year, respectively.
Lenovo saw excellent recovery in Mature Markets’ relationship
business, particularly in the second half of the fiscal year with
both the Global Accounts and Enterprise and Public Sector
business units delivering significant revenue growth and profit.
There were several key global account wins and significant
contract extensions within the fiscal year, which fueled profitable
growth in this segment. These results allowed Lenovo to invest
in growth opportunities such as the retail segment. The Group’s
SMB business across the Mature Markets was profitable even
as it faced challenges in the retail channel due to significant
slowdown in consumer demand. The channel strategy
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