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According to CTOnews.com news on August 10, Lenovo released its financial results for the first quarter of 2023 (April-June). The results showed that the revenue for the quarter was nearly 112 billion yuan, with a net profit of 3.4 billion yuan, an increase of 11% over the same period last year. Yang Yuanqing, chairman and CEO of Lenovo Group, released an internal letter.

Yang Yuanqing said in an internal letter that Lenovo has achieved remarkable results in its investment in the strategic direction for many years, with turnover other than personal computers accounting for more than 37% of the group's overall turnover last quarter, reaching an all-time high. This marks a new milestone in Lenovo's transformation from a PC-centric equipment manufacturer to a provider of intelligent products and solutions.

Yang Yuanqing also said that in the current external environment with greater challenges and more uncertainties, such sound performance is particularly rare and we should be proud of it.

CTOnews.com attached full text of Yang Yuanqing's internal letter:

Dear colleagues,

Today, Lenovo released its financial results for the first quarter of 2022 Compact 2023, and we achieved both an increase in turnover and profitability for the ninth consecutive quarter. In the current environment of greater external challenges and more uncertainties, such steady performance is particularly rare and we should be proud of it.

Last quarter, we increased our net profit by nearly 11% year-on-year, or 35% year-on-year under non-Hong Kong financial reporting standards, making steady progress towards the medium-term goal of doubling net profit margin. Excluding the influence of exchange rate fluctuations, our turnover has increased by more than 5% year on year. What is particularly significant is that our years of investment in the strategic direction has achieved remarkable results. Last quarter, the turnover of non-PC business accounted for more than 37% of the group as a whole, reaching an all-time high. This marks a new milestone in Lenovo's transformation from a PC-centric equipment manufacturer to a provider of intelligent products and solutions.

In the just released Fortune 500 list, Lenovo has become the 14th largest company in the world's technology industry, which is our highest ranking in the global technology field.

Under the multiple challenges such as the impact of COVID-19, the resurgence of inflation, exchange rate fluctuations and the shortage of spare parts, this achievement is not easy to come by. It is due to strategic foresight and execution, as well as operational resilience.

On the one hand, we recognize the general trend of digitization and intelligence, formulate a clear strategy, persist in investment, firmly transform, and build a new growth engine, including SSG solution service business, ISG infrastructure solution business and MBG smartphone business. Last quarter, the turnover of these businesses achieved year-on-year double-digit growth.

On the other hand, we give full play to the advantages of the "global resources, local delivery" operation model in all aspects of "R & D, supply and marketing services" in the face of challenges, with both scale, efficiency, flexibility and risk diversification.

All three business groups made important contributions last quarter.

The opportunity for the  SSG solution services business stems from the trillions-scale and resilient global IT services market, where the mixed office model has led to strong demand for premium and customized services. "everything" and vertical industry solutions related to digital office space are growing rapidly. Last quarter, SSG's turnover increased by 23% year-on-year, and its operating profit margin further increased to nearly 23%. Non-hardware-driven operation and maintenance services as well as project and solution services account for nearly half of the total SSG.

At the same time, SSG continues to invest in software tools, platforms and vertical solutions, expanding TruScale's "Services for everything" portfolio, recently launching hybrid / multi-cloud management solutions, and continuing to build an environmentally focused product portfolio. It will also expand its solution services business to the Asia-Pacific market through a strategic partnership with PCCW.

The  ISG Infrastructure Solutions business continues to benefit from strong growth in the infrastructure market, which is expected to grow rapidly at a double-digit compound annual growth rate between now and 2025, with the marginal computing device market exceeding $41 billion and the storage device market reaching $36 billion. Last quarter, ISG's quarterly turnover reached an all-time high of 13.8 billion yuan and remained profitable for three consecutive quarters. Among them, the turnover of cloud service client business and server and storage business reached an all-time high and the growth exceeded the average growth rate of the market, while the marginal computing business nearly doubled year on year. In the field of high performance computing, we maintain our leading position in the global Top 500 rankings, and apply the unique Poseidon warm water cooling technology to more customer solutions.

At the same time, ISG continues to invest in building a comprehensive portfolio and innovative technologies, especially in cloud services, edge computing and services, and will continue to balance scale and profitability to become the fastest growing end-to-end infrastructure solution provider in the industry.

The  IDG smart device business faces some short-term challenges in the PC market, but in the long run, the total PC market will still be significantly higher than it was before the epidemic. In addition, the market potential for intelligent collaboration and scenario-based solutions is huge. Last quarter, IDG continued to maintain an industry-leading profit margin, contributing more than 7 billion yuan to operating profit. In the PC business, we have defended and consolidated our position as the market champion. In the smartphone sector, we have achieved annual turnover growth of more than 20%, making a healthy profit for nine consecutive quarters. At present, turnover from outside personal computers has accounted for nearly 22% of the total IDG.

At the same time, IDG continues to focus on innovation, from smart devices to intelligent collaboration to smart spaces, creating the best device experience around innovative features, extreme performance, adaptive intelligence and security, and providing seamless integration and connectivity for digital workplaces to achieve optimal collaboration between physical and virtual work scenes.

Overall, last quarter's results laid a solid foundation for us to move steadily into the next phase of the industry cycle. But risks and uncertainties will continue, and we need to be prepared on both sides: to strive for the best results, and to have the flexibility and resilience to deal with more serious challenges.

On the one hand, we firmly believe that the long-term trend of digital and intelligent transformation will continue to drive the growth of our industry. Therefore, we will continue to invest in technological innovation and build core competitiveness, and we will steadily implement the medium-term plan to double R & D investment.

On the other hand, we need to plan and use resources more carefully, adjust timely, and focus investment on supporting strategic and growth areas, while strictly controlling non-essential spending, for which each and every one of us is responsible. This does not mean to stop investing in growth and talent, but to spend limited resources on the cutting edge to ensure adequate resource security in priority areas.

If we do a good job in the above two points, we will be confident that we can successfully pass through the cycle of the industry.

Here, I would also like to invite you to follow and participate in the Tech World Lenovo Innovation and Technology Conference from October 18 to 19. From smart devices to smart spaces, from computers to computing power, from traditional IT to industry digitization, from serving customers to protecting the planet, we will focus on these trends to show Lenovo's latest technological innovation and product research and development progress and results!

No matter what challenges we face, our pace of innovation and growth will not stop, because we have a clear strategy, strong operation, and a team that loves to win. As "the same association", let us continue to overcome challenges, seize opportunities, go to a new level, and jointly build a better future for sustainable development!

Yang Yuanqing, chairman and CEO of Lenovo Group

August 10, 2022

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