Lenovo’s Annual Report: A Letter from our Chairman & CEO

Yuanqing Yang, Lenovo's Chairman & CEO
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This time last year, I began my Chairman’s statement by saying that the previous 12 months had been one of the most significant periods of global change and transformation the world had ever seen. I spoke of the climate emergency, of technology as a driving force for positive social impact, and of the changing future of the workplace. Each of those issues remains just as critical today. Yet looking back, little did any of us know how much the months after those early weeks of the global pandemic would transform our world. How lives around the world would be impacted. How the makeup of the traditional work environment and the way our children learn would be reshaped. How our cities would become silent and the conventional structures of our communities challenged. And how critical technology would be to our lives every day.

Amongst the challenges and the complexity of the last year, we delivered record financial results – closing the full year with revenue of US$60.7 billion, up 19.8% year-on-year – a new milestone for the company. The record revenue was combined with strong profitability. Pre-tax income was US$1.8 billion, up 74% year-on-year and net income was US$1.2 billion, up 77% year-on-year. Even more, we’ve achieved significant progress in our intelligent transformation journey, with services, software and solutions now accounting for 8% of our revenue and growing twice as fast as the Group’s overall growth. In particular, all our business groups had high double-digit growth in the fourth quarter, giving us a strong foundation upon which to build. Further, I am pleased to see that our strong performance, transformational progress, operational resilience, financial discipline, and responsible corporate citizenship have driven up our market valuation over the course of last year.

We demonstrated our focus and resilience by delivering these record results in 2020-2021, but this year was about much more than that. What I now know is that our customers, partners, and colleagues around the world have supported each other on an unpredictable journey. We have fought for the best possible outcome in an uncertain world and continue to use our technology to connect and heal a wounded society. As I reflect on our company vision of delivering Smarter Technology for All, it feels more pertinent today than ever. It’s a privilege to know that our technology, coupled with our relentless determination to deliver for customers, has kept businesses running, children learning, and public services operating in the most challenging of times.

I’ve been inspired and amazed in equal measure by the Lenovo teams who have kept our world turning. From boarding inflatable boats in a flooded factory in China to retrieve parts to building a whole new factory in 47 days. From fulfilling orders in our factory in Mexico in spite of a once-in-a-generation snowstorm and blackout to accelerating the delivery of education orders so 7 million students in Japan could continue studying. From donating US$600,000 to organizations promoting social justice in North America to employees in our Benelux team raising hundreds of thousands of Euros to support children in need. All of these efforts and more confirm my experience that Lenovo teams will do remarkable things to help our customers and communities.

The opportunities ahead

Building on this momentum, we are keen on capturing new opportunities, riding and shaping major trends that favor our business. Firstly, the consumption upgrade. In this New Normal, people are spending more time on their devices, buying more, and upgrading more often. Fulfilling our customers increasing demands through innovative technologies and products is Lenovo’s clear path and responsibility.

As part of this consumption trend, we’re seeing a few key technologies be the driving force for the device innovation agenda. These include looking better in video calls with computational photography technology, hearing more clearly through microphones with AI-based active noise cancellation, or seeing more comfortably with low blue light flicker-free screen to reduce eye strain. Faster connections like 5G are supporting a changing work pattern, new form factors like ThinkBook Plus Gen 2, ThinkReality A3 smart glasses, and Yoga AIO 7 are recognising the evolution of how customers are using their devices, and smart collaboration tools and smart meeting solutions are transforming the experience of remote and virtual working. Innovation comes in all shapes and sizes.

The second trend is infrastructure upgrade. In the past, customers purchased IT infrastructure as “products”, like servers, networking and storage. Today, they are buying computing power and solutions. Lenovo is uniquely positioned here with a broad infrastructure portfolio, from on-prem data center to private and public cloud, and from edge to cloud. Through our direct engagement with enterprise, SMB customers, and even Cloud Service Providers, our strategy is to provide full infrastructure solutions and services – not only hardware, but consulting, deployment, and maintenance services.

Thirdly, we’re seeing a trend around application upgrade – from digitalization to intelligent transformation, with A.I. at its core and supported by data, computing power and algorithms.

First, data will come not only from smart devices, information systems and internet, but increasingly from IoT devices like smart medical devices, machine tools, etc.

Then, data will need to be stored, organized, and analyzed for machine learning, and this requires computing power. Simpler computing can be done on the client side, but a majority of the work has to happen in the cloud. And to connect devices with cloud, high-speed networks like 5G and fiber optic are essential. When too much data gets transmitted between client and cloud, “traffic jams” and delays will happen. So, edge computing emerged between devices and cloud for faster responses with lower latency. This is the architecture of “computing power”. And finally, algorithms will work the magic to learn the logic of methodology and provide the inference, and with data and computing power, make intelligent solutions possible.

Structured for the future

I believe Lenovo is well-positioned to capture the opportunities presented by the three trends, with our innovation, product portfolio, customer access, and business model. It’s against this evolving landscape of customer and technology changes that we have reorganized the company, effective 1st April 2021, into three business groups aligned to delivering our 3S Strategy (Smart IoT, Smart Infrastructure, Smart Solutions). Namely IDG (Intelligent Devices Group) – focused on various Smart Devices and IoT; ISG (Infrastructure Solutions Group, renamed from DCG, Data Center Group) – focused on Smart Infrastructure; and SSG (Solutions and Services Group) – focused on Smart Verticals & Services. In particular, the new Solutions and Services Group will spearhead the company’s transformation by delivering incremental business across smart verticals, attached services, managed services and our ‘as a service offerings’ including DaaS and Truscale™.

Our place in the world

At the heart of our smarter technology for all vision is the belief that no one should be left behind in our shared digital future. We’ve seen over the last year what an incredible equalizer technology can be, but also the catastrophic impact on livelihoods and future opportunities when technology isn’t advanced enough, accessible to everyone, or affordable. The Lenovo Foundation is just one of the ways we empower communities around the world with access to technology and education in Science, Technology, Engineering and Mathematics (STEM). And I see our work with charitable partnerseducational institutions and change makers as more essential than ever.

More than anything, we recognize the role big corporations like Lenovo play in driving action around critical global issues and challenges like climate change, epidemics, and natural disasters. We announced in our annual ESG report how we’ve reduced scope 1 and scope 2 greenhouse gas emissions by 92% over the past decade and have aggressive new science-based targets for the next decade. In fact, we’ve been recognized by the annual Corporate Knights Index for those efforts as one of the world’s 100 most sustainable companies. But our intent and actions are bigger than that – we are focused on building a brighter, more sustainable future for our customers, colleagues, communities and the planet – which is why our actions extend to everything from sustainable product design and packaging; to inclusive product design and building an inclusive workplace.

In fact, we see the importance of ensuring our products are inclusive and truly developed and innovated ‘for all’, which is why we launched the company’s first Product Diversity Office in 2020, with a mission to implement a Diversity by Design review board and introduce checkpoints to our product planning, development, and execution phases which ensure that our solutions are both inclusive and accessible. By 2025, inclusive design experts will vet 75% of future Lenovo products to ensure they work for everyone – regardless of physical attributes or abilities. We also know that customers small and large trust us every day and that challenges like supply chain and product security are becoming more critical, which is why we introduced a Chief Security Officer with an overarching role to harness all elements of security across the company including security culture, product security, data privacy, supply chain security, cybersecurity, and the security of physical assets.

Looking ahead, my focus remains on building a long-term sustainable business where every customer, partner, investor, supplier, and employee can benefit in the shared value of our business success. I’m confident that the change accelerated over the last year only creates more opportunity for Lenovo to both power (through products) and empower (through solutions) our customers and our wider society to not only survive in the ‘new normal’, but thrive in a way that helps the company, our partners, and our customers achieve even higher levels of success.

YY

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Read Lenovo’s Full Annual Report: click here

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