Lenovo 2016 Annual Report Download - page 21

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2015/16 Annual Report Lenovo Group Limited
For the fiscal year ended March 31, 2016, revenue of the Group’s PC business was US$29,646 million,
representing approximately 66 percent of the Group’s total revenue, and a year-on-year decline of 11
percent, mainly due to currency fluctuations and slower PC market demand. Excluding currency impacts,
the revenue decrease would be 6 percent year-on-year. The PC business recorded a pre-tax income of
US$1,491 million, against US$1,772 million last fiscal year, and the business group maintained its pretax
margin solidly at 5.0 percent despite market challenges.
Mobile Business Group (MBG)
During the fiscal year under review, in view of the softer demand and keen market competition, the
Group has accelerated its actions to build up the quality of its mobile business. As part of the business
realignment plan taken in the fiscal quarter two, the Group has further aligned the key elements of
Motorola Mobility with Lenovo to leverage the complementary strengths, streamline the product portfolio,
improve efficiency and enhance the cost structure. The Group also focused on clearing the smartphone
inventory in the market to drive healthier channel inventory position to build a more solid foundation to
drive future growth.
Despite the much softer smartphone market towards the end of the fiscal year under review, the Group’s
refined strategy to focus on markets outside of China is paying off. In the five geographies where the
Group is operating, it recorded strong market positions in three of them – EMEA, AP and LA, driven by
the solid momentum in the faster growing emerging markets. Its smartphone shipments showed strong
momentum in EMEA, growing 83 percent year-on-year. It also demonstrated sizeable growth in AP,
growing 96 percent year-on-year, and established a stronghold in LA with double-digit market share of
11.1 percent and shipments growing 46 percent year-on-year. And thus the Group’s smartphone shipments
in markets outside of China grew 63 percent year-on-year to 51 million.
Nevertheless, the Group has been under business transition in China and North America, which resulted
in a decline in these two regions for the Group in fiscal quarter four and the fiscal year under review. In
China, the Group has been undergoing continuous business transformation as planned, through actions in
driving product transition and branding, and shifting focus to open market and higher main stream price
band products, while its North America business experienced a slower-than-expected product transition
that it missed a key window of opportunity during the fiscal quarter four in North America which affected
the performance.
The Group’s worldwide smartphone shipments declined 13 percent year-on-year to 66 million due to
declines in China and North America. Lenovo’s market share in the worldwide smartphone market
decreased by 1.1 percentage points year-on-year to 4.6 percent. For the fiscal year ended March 31, 2016,
the total revenue from Mobile business increased 7 percent year-on-year to US$9,779 million, representing
approximately 22 percent of the Group’s total revenue. For the fiscal year under review, the Group’s
mobile business recorded an operational loss before taxation of US$469 million and a negative 4.8 percent
pre-tax margin, if excluding the non-cash M&A related accounting charges.
Enterprise Business Group (EBG)
During the fiscal year, Lenovo continued to integrate the acquisition of System X. The Group enhanced its
number one position in China and expanded its presence in hyperscale segment by winning several key
accounts during the fiscal year. The Group has also established partnerships with leading tech companies,
including Nutanix, Juniper, Redhat and SAP, to attack the fastest growing enterprise segments of
converged, hyperconverged, cloud and hyperscale.