future prospects - Lenovo

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2009/10 Annual Report Lenovo Group Limited 16 MANAGEMENT’S DISCUSSION & ANALYSIS ThinkPad Edge Notebook Mobile’s performance in the Group’s results for the year ended March 31, 2010. PERFORMANCE OF GEOGRAPHIES During the year ended March 31, 2010, Lenovo saw year-on-year improvements in its geographic performance as compared to the previous fiscal year, benefiting from the focus on its strategic priorities and its strong execution. The Group’s China business delivered solid profits while losses incurred in Mature Markets and Emerging Markets (excluding China) were reduced significantly. China China accounted for approximately 47 percent of the Group’s total sales. China’s economic stimulus packages and its rural subsidy program for PCs aided in driving demand in both commercial and consumer segments, especially for consumer notebooks. With growth momentum further improving in the second half of the year, the China PC market posted 31.9 percent year-on-year growth in unit shipments. Lenovo further expanded its leadership with 37.4 percent year-on-year increase in unit shipments by: focusing on capturing high growth opportunities in the rural market and government stimulus projects, refining the small-andmedium-sized business (SMB) model, strengthening cross-selling capability in the large enterprise segment, and enhancing storefront competitiveness. The Group’s market share rose 1.2 percentage points year-onyear to 30.0 percent based on preliminary industry estimates, and achieved a historic high market share at 33.4 percent in its traditional peak season at the quarter’s end in December. As noted, Lenovo completed its reacquisition of Lenovo Mobile at the end of January after shareholders approved the transaction on January 22, 2010. As a result, China included approximately two months of Lenovo Mobile contribution for the fiscal year. Emerging Markets (excluding China) Emerging Markets (excluding China) accounted for approximately 16 percent of the Group’s total sales. Economic growth in emerging and developing economies was affected by the financial crisis. As a result, growth in the PC markets in certain emerging markets declined substantially in the first half of the
year, while rebounding in the second half of the fiscal year. Lenovo showed a strong growth momentum in the region in the last fiscal year, and grew by 34.5 percent in unit shipments compared to last year. According to initial industry estimates, Emerging Markets showed a year-on-year increase of 1.0 percentage points to 4.8 percent for the fiscal year. To gain better efficiency and speed to market, Lenovo set up distinct end-to-end business models for each key country in the region. The Group launched a series of innovative and popular Idea branded products into 18 countries to address the needs of consumer segment. Meanwhile, the Group also kick-started its efforts to develop core channels across the region, resulting in increased share of wallet and stronger bonds with core business partners. Mature Markets Mature Markets accounted for approximately 37 percent of the Group’s total sales. Impacted by sluggish commercial demand in mature markets, Lenovo started off in a low growth environment in the first half of the year, but greatly improved its performance during the second half. The improvement in second half performance was largely attributed to ThinkPad X100e notebook the strong growth in SMB and consumer segments. Strong notebook growth was seen consistently across all key geographies within the region which helped offset a continuing decline in the desktop PC business. However, PC demand from the enterprise market continued to remain relatively weak during the year, while future growth indicators, such as requests for proposals, increased towards the end of the fiscal year. The Group implemented its new Mature Markets Group structure at the start of the year to better leverage best practices across the region. This action resulted in a more streamlined and unified business management system as well as reduced operating expenses. The Group also re-invigorated its channel strategy with the formation of a dedicated channel partner organization to broaden its reach through channel partners for improved growth and profitability. The channel strategy also aimed to simplify and increase the reach and customer coverage of the relationship business through the use of channel partners. The Group has also implemented its transactional business model across the mature markets, replicating best practice developed in China, optimizing its organizational structure to support end-to-end campaign management and broadened coverage for multiple price cells. Lenovo has also expanded its consumer and retail presence in the region. Lenovo grew by 8.9 percent in unit shipments in Mature Markets compared to last year. The Group’s overall market share increased in all countries within the region with exception of those in North America, and reached 4.4 percent according to the latest industry estimates. With relatively limited retail presence in this region, Lenovo’s share gains highlight its strong execution in the market segments in which it has presence. 2009/10 Annual Report Lenovo Group Limited 17
Page 1 and 2: THE FUTURE IS HERE 2009/10 Annual R
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Connected transactions (continued)
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INDEPENDENT AUDITOR’S REPORT Inde
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CONSOLIDATED STATEMENT OF COMPREHEN
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2010 2009 2008 Note US$’000 US$
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CONSOLIDATED CASH FLOW STATEMENT Fo
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6 Other income - net 2010 2009 US$
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WWW.LENOVO.COM This report is print
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