In its fiscal quarter ending June 30, Lenovo's biggest money maker was its laptop business.
Now here's an interesting twist: Lenovo is ranked as the #1 PC vendor worldwide, beating out rivals HP, Dell, Asus and Acer. Yet during its fiscal first quarter ending June 30, the company sold more smartphones and tablets than it did desktops for the first time ever. That's partially due to Lenovo's presence in China where its smartphone business has grown 121 percent year-over-year, making it the second largest smartphone vendor in China and the fourth largest vendor worldwide.
"While driving profitable growth in our core PC business, we are rapidly transforming our company into a PC Plus company," said Yang Yuanqing, chairman and CEO of Lenovo. "The PC Plus market requires fast, efficient innovation as it moves quickly from premium products to mainstream ones and from mature market domination to emerging market hyper growth. This kind of market plays to Lenovo’s proven strengths. Lenovo is now better positioned than our competition to take advantage of these clear trends."
Lenovo said that during its fiscal first quarter, laptops were the largest contributor to the company's revenue worldwide, generating 52 percent even though laptop shipments were down 12.9 percent year-over-year across the industry. This business brought in $4.5 billion USD, an increase of 4.7 percent year-over-year, and achieved a 17.3 percent market share. Products released during that quarter included the ThinkPad T431s, the Yoga 11s, and the Yoga 13.
Lenovo said its desktop PC business growth remained flat worldwide year-over-year even though the desktop industry has declined 9.4 percent year-over-year across the industry. This business generated $2.5 billion, or 28 percent of the company's total revenue, but decreased 2.8 percent year-over-year while achieving a 16 percent market share. Products launched during this quarter included the Horizon Table PC, a 27 inch AIO desktop which can be laid flat and used like a huge multi-user tablet.
The company said its Mobile Internet Digital Home (MIDH) business, which includes tablets and smartphones, saw a sales increase of 105 percent year-over-year, generating $1.2 billion and 14 percent of the company's total revenue in the first fiscal quarter. The company specifically pointed out its growth in China during the quarter, reporting that smartphone shipments jumped 121 percent year-over-year. Tablet shipments grew more than three times year-over-year, propelled by the ThinkPad Tablet 2, the 7 inch A1000 and A3000 models, and the 10 inch A6000.
Just recently Yuanqing told the Wall Street Journal in a phone interview that if a company can't drive growth, then it should pay more attention to margins. Thus, the sales team was tasked to push more high-end products even though the overall PC market is declining. The result was that the company's PC business managed to increase its revenue while shipments declined worldwide.
"Our average selling price improved, not just in China but world-wide," he said. "Fortunately, we had already launched some attractive high-end products, like the IdeaPad Yoga and the ThinkPad Helix as well as ThinkPad X1 Carbon. They helped raise average selling prices. We have very disciplined cost management, and that has also helped us improve profitability."
He also admitted that the company's smartphone business is not a profit engine -- yet. It's already become profitable in China, but it's still in a developmental phase. The company is currently working to become a market leader in that region by investing in branding, sales channels and product development. Because of this, there is little net profit. Outside China, the smartphone business is still developing.
"But our tablet business is already profitable worldwide," he said. "We leverage our PC sales channels to sell tablets. With tablets, we can take advantage of our leadership position in the PC market."