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Knock knock. Who's there? A Lenovo server salesperson, because revenue dip's no joke

PCs are going great, but enterprise and mobile divisions are in turnaround mode

By Simon Sharwood, 17 Feb 2017

Expect Lenovo server and storage sales people to knock on your door, soon and often, because the company's identified the lack of its own direct sales force as the reason for poor performance in its Data Center Group for the third quarter of its 2016/17 financial year.

The company has plenty of pleasing numbers to report, among them a two per cent boost to PC revenue and the same growth in year-on-year shipments. Lenovo counts PCs and tablets in the same bucket, but as both products are experiencing falling sales even a mere two pips of growth is grand news. The company reckons it has reached an all-time-high 22.4 per cent market share and shipped 15.7 million devices.

But elsewhere, things weren't as rosy.

Mobile phone revenue slumped 23 per cent year on year, although shipments rose quarter on quarter.

The data centre group, home of IBM's former System X business, dropped 20 per cent year on year and three per cent compared to last quarter. Revenue for the 90 days was US$1.1bn, rather behind the likes of HPE and Dell, and also behind IBM even though Big Blue now only sells exotic servers.

On the company's earnings call Chair and CEO Mr Yang Yuanqing said the data centre business is “still in transition” because while Lenovo got lots of lovely product and capabilities from IBM it didn't get a direct sales force.

“We had to depend too much on channel sales which created fluctuation in revenue and profitability,” he said. “We now have a plan to build direct sales capabilities.”

When the company does so, Mr Yang predicts happy days ahead as Lenovo's current direct sales team, a global concern, can point to 38 per cent year on year growth. There's also good signs of enterprise hardware sales improvements in North America, Latin America and EMEA. China's therefore going to be a big focus.

Overall, the company's in decent shape. Quarterly revenue hit US$12.2 billion for net income of $98m. Which isn't a stellar margin. But Yang thinks there's better times ahead once the data centre and mobile businesses come good.

Good luck with that, Lenovo, given that the server market is flat, the storage market is in gentle decline and this little thing called "cloud" has buyers behaving rather strangely. ®

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