May 21st, 2009
Lenovo's PC shipments falling faster than market; Posts annual loss
Lenovo’s fiscal 2009 ended with a thud as the company’s PC shipments fell faster than the industry’s decline overall. The company has been rattled by a slowdown in enterprise demand and “under-representation in consumer markets.”
To wit:
- Lenovo’s fourth quarter PC shipments fell 8.2 percent from a year ago. Industry PC shipments fell 7 percent.
- Fourth quarter sales fell 25.8 percent to $2.8 billion. Lenovo also lost $264 million in the quarter.
- The company is restructuring to save $300 million in 2009/2010.
- Lenovo remains a notebook story. Laptops represent 60 percent of Lenovo’s total sales.
- For fiscal 2009, Lenovo said sales fell 8.9 percent to $14.9 billion with PC shipments growing 2.2 percent. The company lost $226 million for the year.
Nevertheless, Lenovo Chairman Liu Chuanzhi said in a statement that the company has “the right pieces in place” to rebound when the economy improves. The game plan from CEO Yang Yuanqing: Defend Lenovo’s position in China, make the enterprise business profitable and target the consumer and small business markets to boost growth.
Here’s the problem: Lenovo faces tough competition in the consumer market from Acer, Dell and HP. It’s not like you can just drop in on the consumer market and be a hit. It’s the same story for the small business market. Lenovo has a much better foothold in the enterprise market, which is dragging. The most solid part of Lenovo’s plan is to defend China.
Indeed, Lenovo’s China sales in the fourth quarter were $1.2 billion, or 43.6 percent of revenue. Lenovo wound up with 26.7 percent share in China and the company outpaced the industry in the PC shipments.
Review: Lenovo IdeaPad S10 4231
Simply put, Lenovo’s move to defend China is a no brainer. But the rest of the globe presents challenges for Lenovo. Americas revenue was $682 million, or 24.6 percent of sales, but shipments fell 19 percent. Europe and Asia Pacific had similar stories with units falling 13 percent and 32 percent, respectively.
The company is diversifying into the consumer market with products like the IdeaPad and a new lineup of desktop PCs, but those moves will take time. Lenovo will face tough sledding everywhere but China.
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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