Stumbling Lenovo turns in record loss
Fourth quarter was pants
Stumbling PC giant Lenovo saw sales and profits fall further than expected in the fourth quarter.
The firm, which owns the ThinkPad brand, said sales fell 26 per cent to $2.8bn in the fourth fiscal quarter of 2009. Gross profit was down 49 per cent to $285m.
Factoring in restructuring charges and other costs Lenovo made a pre-tax loss of $285m in the three months ended 31 March. The board of directors has cancelled the full year dividend payment.
Lenovo's chairman, Liu Chuanzhi, said: “...while our performance in the fourth fiscal quarter did not meet our expectations, we are confident that we have the right pieces in place to hit our financial targets and be ready to take advantage as economic conditions improve.”
Laptops account for 60 per cent of Lenovo's sales.
Greater China accounts for 43.6 per cent of Lenovo's total sales - $1.2bn in the fourth quarter - and it strengthened its position in the top slot there. We've asked for a definition of "Greater China"...
The Americas brought in sales of $682m, down 19 per cent year on year. Europe, the Middle East and Africa saw sales of $591m, down 13 per cent. Asia-Pacific, excluding Greater China, made sales of £291m, down 32 per cent year on year.
The company expects to save $300m next year as a result of restructuring - it has divided its business into different regional units.
For the full year Lenovo made sales of $14.9bn, a 2.2 per cent fall on last year. Gross profit margin also fell from 15 per cent last year to 11.9 per cent this year. The firm made a full year loss of $226m.
Full statement available from here. ®
3 reasons for me
First off, I should say I haven't bought a Thinkpad, so.... but anyway here's the reasons I think people aren't buying.
1) Brand recognition. Some probably quit buying just because "they aren't IBMs any more". I wouldn't, so long as there weren't other changes. But...
2) Quality. I've seen lots of IBM Thinkpads and some Lenovo Thinkpads. The early Lenovos were just IBMs with a Lenovo badge, they were exactly the same. The later ones, as the AC says a few posts above, are not the same. I don't OWN one so I can't say they're bad, but they are not quite as solid.
3) Price. Despite #2 --^, they're charging "old" Thinkpad prices. The economy's down, people don't want to pay that much even if the machine is fantastic.
4) Linux. For me this will knock Lenovo out of the running.... I will not pay the Windows tax.. partially because I don't want to send them money, and even more so because I don't want to be counted as a Windows user when Microsoft etc. claim some huge % of people use Windows.
Companies are dropping ThinkPads
Lenovo has clearly failed to keep up what was keeping the ThinkPad brand alive in a world of cut throat pricing and low margins. If the ThinkPads were being sold before Lenovo acquired the brand was because of their robustness. When Lenovo started to "optimize" the design to extract higher margins and reduce the price of each unit sold, they started to lose customers.
Lesson for the marketing executives: while the brand by itself does have the power to invoke some feelings on the customer, you cannot keep it alive without a product baking those feelings behind. So instead of focusing on concepts and abstract meanings, marketing is about creating the product that satisfies the user needs.
Lesson for financial drones: just making an spreadsheet that shows that you can make the brand profitable does not mean anything if you're getting the profit by dropping some of the attributes that make it sold in the first place (i.e, quality)
Lenovo cannot pretend to sell ThinkPads without them having the properties that people associate with ThinkPads. Better drop the brand altogether, which of course would be an stupid decision giving the loads of money they paid for it.
Lesson for the rest of the world: when IBM sells something it's because they know they cannot make a decent profit of it any longer. If you think that you can do better than IBM financial guys and IBM lawyers, think twice.
IBM has lately became a formidable legal and financial machine. You simply cannot be beat them at that. The only way of beating IBM is with better technology or services. My view is that in the long term the financial and legal powers at IBM will destroy the company, for the same reasons that Lenovo is destroying the ThinkPad brand. In each sucessive round of "optimization" they are eroding the very fundamental attributes of the IBM brand that made them successful in the first place.
Dell's Latitude line has trackpoints. I can't say as I like the trackpoint in my Latitude D610 as much as I liked the trackpoint in my IBM Thinkpad from the golden era of the IBM Thinkpad (circa 2000), but it's better than no trackpoint.