{"id":228311,"date":"2018-02-28T07:26:52","date_gmt":"2018-02-28T05:26:52","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=228311"},"modified":"2018-02-28T07:26:52","modified_gmt":"2018-02-28T05:26:52","slug":"lenovos-downward-spiral-may-not-be-over-just-yet","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/it-services\/228311\/lenovos-downward-spiral-may-not-be-over-just-yet\/","title":{"rendered":"Lenovo’s downward spiral may not be over just yet"},"content":{"rendered":"
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In four years, Lenovo Group went from would-be Apple Inc challenger to an also-ran in smartphones and datacenter servers.\u00a0Now it\u2019s got a comeback plan, but some investors don\u2019t buy it.<\/p>\n

China\u2019s erstwhile tech darling, which lost its perch atop the PC market to HP Inc in 2017,\u00a0has shed two-thirds of its value since hitting a 15-year high in 2015.<\/p>\n

At a two-year earnings multiple of about 10 times, its stock is cheapest among the world\u2019s largest computer makers. Yet all seven analysts ranked best by Bloomberg based on one-year returns urge investors to sell.<\/p>\n

Their average target puts Lenovo 13% below Tuesday\u2019s close.<\/p>\n

From money-hemorrhaging businesses to resurgent competition for its cash-cow PC division and a revolving-door executive team, the company that once aspired to Apple and Samsung\u2019s heights seems to have lost its way.<\/p>\n

CEO Yang Yuanqing\u2019s failed repeatedly to deliver on turnaround deadlines and hasn\u2019t fully articulated a strategy to revive ailing mobile and datacenter arms — even as local rivals gun for its bread-and-butter Chinese customer base.\u00a0The company\u2019s even resorted to selling office buildings to prop up the bottom line.<\/p>\n

\u201cI just don\u2019t see signs of change,\u201d said Qian Kai, an analyst with CICC who\u2019s covered Lenovo for five years\u00a0and the third-ranked analyst of 30 in Bloomberg\u2019s Absolute Return Rankings.<\/p>\n

He lowered his target price to HK$2.60 in February. \u201cLenovo\u2019s been caught in the middle of a very awkward situation where it can neither turn the tables on its home turf nor expand quickly enough in overseas markets.\u201d<\/p>\n

It\u2019s a far cry from the days when Lenovo was at the top of its game. Yang took the stage at an 18,000-seat Beijing arena one frigid winter\u2019s evening in 2014 to surprise euphoric employees with news Lenovo had agreed to take over International Business Machine Corp\u2019s commodity server business for more than $2 billion.<\/p>\n

That same year, it sealed a deal to buy Motorola Mobility from Google, becoming the world\u2019s No. 3 smartphone label.<\/p>\n

That was then.\u00a0The Moto line has tumbled out of the top ranks, unable to expand its footprint in the US and pummeled by fast-moving rivals in Asia from Oppo to Xiaomi Corp. Liu Chuanzhi, an industry trailblazer who transformed Lenovo into one of China\u2019s most recognizable brands, fell on his sword during this year\u2019s address.<\/p>\n

\u201cHow many mistakes have we made? How many mistakes have I myself made?\u201d Liu said in February. \u201cWithout question, today\u2019s Lenovo Group faces severe and acute challenges. The challenge is multi-dimensional and uncertain. It\u2019s an age when innovations in technology and business model are powerful enough to overturn an industry and even social customs.\u201d<\/p>\n

Lenovo\u2019s now overhauling its sales channel. It\u2019s re-enlisted Liu Jun — the architect of the Motorola deal — to reinvigorate China via new avenues such as e-commerce.<\/p>\n

\u201cTurning around the business is still our goal, but we probably need more quarters to deliver that result,\u201d Yang said in an interview in February.<\/p>\n

\u201cWe are transitioning in emerging markets from Lenovo brand to Motorola brand, it hasn\u2019t gone very well. We need to clear inventory and rebuild the brand.\u201d<\/p>\n

It also missed\u00a0out on \u201cits best shot\u201d to grow its server business, Qian said.\u00a0At the time the IBM deal was unveiled, Chinese customers were starting to eschew IBM, Oracle and EMC in favor of local names.<\/p>\n

Many ended up with Huawei or Inspur because Lenovo took eight months to close its acquisition.<\/p>\n

Lately, the company\u2019s shown signs of life. It\u2019s expected to return to (meagre) revenue growth this fiscal year after two successive annual declines. But at least one fund manager warns against getting into a PC sector that remains sluggish at best.<\/p>\n

\u201cThe industry is unlikely to see hyper-growth in the short run,\u201d said\u00a0 Zhang Haidong, a fund manager with Jinkuang Investment Management who doesn\u2019t own stock in Lenovo. Even \u201cthe smartphone business may not see its next inflection point until 2019.\u201d<\/p>\n

Alexander Medd, an analyst with\u00a0Bucephalus Research\u00a0who\u2019s been one of Lenovo\u2019s harshest critics, argues the company needs cool products. But it may be too late.<\/p>\n

\u201cTech brands do not come back,\u201d he said.<\/p>\n

\"\"<\/a><\/p>\n

\n

Read: Lenovo posts surprise loss as mobile unit struggles continue<\/a><\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

In four years, Lenovo Group went from would-be Apple Inc challenger to an also-ran in smartphones and datacenter servers. Now it\u2019s got a comeback plan, but some investors don\u2019t buy it.<\/p>\n","protected":false},"author":59,"featured_media":190960,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[53,26,1388,7210],"class_list":["post-228311","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-it-services","tag-google","tag-headline","tag-lenovo","tag-xiaomi"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/228311","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=228311"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/228311\/revisions"}],"predecessor-version":[{"id":228317,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/228311\/revisions\/228317"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/190960"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=228311"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=228311"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=228311"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}