To further reflect on Lenovo’s performance for its fourth quarter and full fiscal year 2020/21, we sat down with our business group* leaders to dive deeper into their business performance highlights, hear about the lessons they learned while facing the unique challenges of the last year and the opportunities they see in the year ahead.
What are the highlights from your business performance in the past fiscal year?
Gianfrano Lanci: I’m incredibly proud of the entire IDG team for their remarkable resilience and optimism during a challenging time for all last year. Through a relentless commitment to putting customers and communities first, IDG achieved a record high revenue, growing 20 percent year-on-year last fiscal year.
We had our best fourth quarter ever for IDG’s PCs and Smart Devices business, up 46 percent year-on-year and profitability at an all-time high at 6.7 percent. In fact, every single one of our geographies achieved high double-digit growth in PCs and Smart Devices revenue and PC volume outgrew the market to further reinforce Lenovo’s position as the world’s #1 PC company. Tablets also saw a breakthrough quarter, soaring 157 percent year-on-year, outpacing the market by 3x. Our high-growth segments including gaming, thin and light devices, Chromebooks and visuals solutions also continued to beat the market and deliver strong double-digit growth rates.
Our Service-led Transformations strategy is also paying off – with software and services revenue growing at almost 40 percent year-on-year. All these milestones are proof of the strength of Lenovo’s culture in always prioritizing the customer, never ceasing to innovate, embracing entrepreneurship and the power of what diverse and inclusive teams with a bold vision and shared values can accomplish together.
Kirk Skaugen: ISG delivered our best business performance this past fiscal year with record revenue of $6.3B for the year, while also improving pre-tax income (PTI) year-on-year driven by double digit growth in Cloud Service Provider (CSP), the strongest revenue in Enterprise/SMB in three years and record high revenue in all other core businesses.
We also delivered premium to market revenue growth, thus gaining share across all segments of our business, while reducing PTI losses by the largest percentage in our history. We continued to make progress on building out our in-house design and manufacturing capabilities – so that our customers have an end to end solution from board design to rack integration, all within Lenovo. I am proud to say we accomplished this during a global pandemic and proved that Lenovo and the Infrastructure Solutions Group can thrive under the most challenging circumstances.
Sergio Buniac: This past year has been a rollercoaster year with the uncertainty brought on by the global pandemic. However, it brought out the best in our organization by forcing us to focus on our strengths and recover from a tough situation. As a result of our resilience, we succeeded in four key areas:
- Accelerating our trajectory: We recovered from initial market slowdowns to achieve quarter-to-quarter revenue growth in each quarter while also improving our profitability. We ended with a record fourth quarter, achieving our highest quarterly profit since Motorola joined Lenovo and our highest year-on-year revenue growth in the past eight quarters. As a result of our strong performance throughout the year, we grew revenue 9% year-on-year and outgrew the market by five points in year-on-year unit growth.
- Driving growth in our geos: We also drove broad-based growth with premium-to-market volume and revenue growth across all our markets. In our stronghold markets, we achieved our best market position with a record 20.9% share in Latin America, and four consecutive quarters of premium-to-market growth in North America. In other markets, we continued our hypergrowth trajectory with double-digit premium-to-market volume and revenue growth in Europe, APMEA and India.
- Growing profitability: We managed to drive growth across our geos while achieving record profitability for two quarters in a row. On top of that, all our geos were operationally profitable for four quarters in a row – the first time this has ever happened since Motorola joined Lenovo!
- Expanding our strategic initiatives: Finally, we continued to drive strategic initiatives. We continued making 5G more accessible than ever with the launch of moto g 5G plus (1st to 5G in mid-tier) and moto g⁵º (bringing 5G to the $250 price tier), we focused on innovation that matters and introduced new experiences like “ready for” to amplify our smartphones’ capability beyond the small screen, and we launched ThinkShield for mobile to satisfy the needs of our B2B customers and to drive synergies with the broader Lenovo go-to-market.
What are some of the most unexpected lessons you’ve learned over the past year?
Gianfranco Lanci: Last fiscal year offered ample lessons for us, as businesses across every industry had to use technology to adapt and survive. Technology became the lifeline that kept businesses productive, kept students educated, and kept families and friends connected. As a global company operating in nearly every time zone, Lenovo understands the importance of work-life blend and embraced a flexible work policy even before the pandemic. This culture of trust and empathy towards employees as well as equipping our teams with the right technology for working from the office and from home, have made Lenovo better equipped than many in maintaining business continuity.
While we were prepared for work-from-home and knew that Lenovo would weather the storm, we were surprised to see how many employees at Lenovo and other large companies flourish in their productivity and job satisfaction while working remotely – tempering initial concerns of decreasing efficiency or remote work burnout. Over the course of the year, work-life balance has evolved into a healthier work-life blend for many employees, as smarter technology has enabled better virtual collaboration. This is a testament to Lenovo employees’ remarkable resilience and resolve in adapting to remote work. As the world transitions into hybrid work, I’m confident that the Intelligent Devices Group under Luca Rossi’s new leadership will continue to thrive because of our teamwork, passion, and determination for what we do, regardless of circumstance.
Kirk Skaugen: Technology is at the core of everything we do in our daily lives and there has been no greater purpose than using our technology to address COVID-19. Our technology industry was called upon to help address the world’s most important needs throughout this crisis and I am proud how the Lenovo team rose to the occasion when the world needed us most.
The past year created both disruption as well as opportunity. Lenovo adapted a flexible execution model – as did many of our partners and customers. And because we had already established those relationships, we all evolved to continue conducting business together. Although face to face contact is often still required, and does make a difference, we found that it wasn’t required to retain our customers, partners, and suppliers. We quickly learned that through a strong team with trust as the foundation – we could thrive through adversity and meet challenges head on. Our resiliency kept our supply chain afloat in one of the most critical times in history: we had to work like people’s lives depended on it, because it did!
Sergio Buniac: This past fiscal year has tested our resilience, patience and adaptability. And I could not be more proud of how our team has handled this uncharted territory together. We worked in entirely new ways to address the novel challenges of the past year while protecting our employees.
One of the key aspects that we had to adapt to is the fact that the strong industry recovery created industry-wide shortages. As a result, we have had to get creative to gain access to critical components and drive innovation. We accomplished that by leveraging the broader Lenovo strength to negotiate strategically with our suppliers and to be nimble and innovative in the way we bring our products to market.
This agility also involved taking a unique approach with our product development and roadmap, but it is a testament to our ability to innovate.
What are the key opportunities you see in the year ahead and how will your business group leverage Lenovo’s new service-led strategy to drive success?
Gianfranco Lanci: Firstly, we’ll continue to prioritize listening to the needs and feedback of our customers and employees, who are the center of our business. We’ll also continue to step up and show up for our communities around ESG (environmental, social, governance) as we did with donations of PCs to students in Italy and distance learning toolkits among many other efforts in response to COVID-19.
As we know, the pandemic-triggered disruptions in work, school and social connection has accelerated digital transformation and an “everything-from-home” environment that will continue to affect the transition into hybrid. With the renaissance of the PC as people’s dominant device for day-to-day productivity, collaboration, education, we must never stop innovating in PCs and smart devices – from 5G to AI to new form factors.
In addition to staying focused on our core PC and smart device business, we see great opportunity in tapping into our hardware and software capabilities as an enabler of services and solutions, in partnership with the recently formed Solutions and Services Group under Ken Wong’s leadership. As the “everything-as-a-service” trend continues to grow, Lenovo is ready with solutions such as Device-as-a-Service (DaaS) that leverage the powerful combination of our innovative hardware, seamless software and complete services.
We will also continue to incubate emerging technologies as a growth engine for new customer needs in a hybrid environment across healthcare, smart collaboration, edge computing, commercial augmented and virtual reality (AR/VR), etc. And last but certainly not least, we will go all in in making it as easy as possible for our valued customer and partners to do business with us. This includes continually optimizing the tools and processes for sales and marketing transformation and harnessing the collective capability of One Lenovo.
Kirk Skaugen: As businesses continue to adjust to the “new normal” and the evolving pandemic, the strength of Lenovo’s supply chain and its role in helping businesses adopt emerging technologies is a key opportunity for growth. Lenovo was most recently recognized as #16 on Gartner’s Top 25 Global Supply Chain companies for using technology to enable automated and seamless customer experiences at scale, all while navigating the challenges of the ongoing pandemic.
In addition to our supply chain focus, we are making significant investments in our manufacturing transformation. We expanded our manufacturing capacity in both Monterrey and Guadalajara Mexico, where we are now building both motherboards and servers. And, later this year we will open our world class manufacturing plant in Hungary. We are the only company that has complete in-house end-to-end ownership from design, to manufacturing and supply chain, to global services.
And finally, in our new reality that requires an increased need for business flexibility and agility, we are investing heavily to create new capabilities across the services spectrum. We continue to expand our TruScale as-a-service offering for customers of every size and most recently announced a new Lenovo TruScale for Hosted Desktops solution that offers users a remote desktop to work anywhere, anytime.
Our competition is strong, but we have the right initiatives in place. We are the disruptor and we are the people our competition is fearful of! I am confident in ISG’s continued profit improvement and revenue and market share growth in the new fiscal year.
Sergio Buniac: Going into FY21, we have tremendous momentum in our business with the highest demand for our products and continued improvement in our NPS scores. In addition, we have a wide customer footprint with our 5G products being sold in 80+ partners across 35+ countries. All of these factors have strengthened our reputation as a trusted global brand.
Given our strong performance, and our momentum, we expect to continue our strategy of profitable growth in FY21. On top of these opportunities, we are also excited about the strategy of broader “One Lenovo” and believe we are well positioned to capitalize on leveraging the synergies across the business groups.
*Lenovo reported its Q4 and FY 2020/21 results under its old organizational structure of Intelligent Devices Group (IDG), which consisted of Personal Computing and Smart Devices plus the Mobile group, and the Data Center Group (DCG). Starting next quarter and fiscal year, Lenovo will report under its new structure consisting of IDG, the Infrastructure Solutions Group (ISG), which is the renamed DCG, and the new Solutions & Services Group (SSG).