Lenovo’s Q4 fiscal results are out and the news is mixed. The company has seen its third straight quarterly profit and revenue is up year to year, but the good news is overshadowed by falling margins and worries of commoditization.
Revenue for the past fiscal year is up 11% to $16.6 billion, largely thanks to China which made up 47% of those sales. This revenue growth came at the cost of profit margin, which dropped from 12.1% to 10.8%. The Q4 net profit was particularly off estimates, coming in at $12.8 million compared to a $35.5 million market forecast.
A quote from Frank He of the BOCI research firm perfectly sums up my fears, and sadly my expectations for Lenovo’s direction:
“Margins will still be under pressure in the coming year due to the ongoing product mix shift to lower end or entry level products, and also we see that the previous premium product, the Thinkpad, is tending to be more of a mass market product,” said BOCI analyst Frank He.
There was also mention that the company is expecting rising memory and LCD prices, which will provide additional challenges.
Going forward, Lenovo’s continued focus is on emerging markets and its homeland stronghold in China.
So, dear reader and fellow-ThinkPad-enthusiast, do you see ThinkPad going the way of the commodity? Are lower prices worth the feature de-contenting and devaluation of the brand? Or are you just happy to get your ThinkPad for >25% off? I’ll post an editorial of my own on this topic.
Source: [Reuters]
{ 13 comments… read them below or add one }
> Are lower prices worth the feature de-contenting and devaluation of the brand?
No.
Lenovo, unfortunately, will likely not realize this until they’ve alienated their business and high-end consumer customers.
At this point, I’d be happy if Lenovo would pay more attention to shipping on time. My company has requested over 30 ThinkPad X201s machines and a W701ds machine (the pre-built “top-seller” models) and the Lenovo Partner we are working with keeps coming back with “Lenovo is saying end of month”. This has been going on for about 2-1/2 months now! Oh, and they didn’t care how many we were buying, they weren’t willing to discount the price…
I relealize it could be our reseller’s fault, but when I try to check stock at other Lenovo Partners, it’s the same story.
> So, dear reader and fellow-ThinkPad-enthusiast, do you see ThinkPad going the way of the
> commodity? Are lower prices worth the feature de-contenting and devaluation of the brand?
Say it ain’t so! My ThinkPad T43 and X201 have been the most reliable computers I ever. I will continue paying a premium for ThinkPads as long as they continue to be quality products.
Yes, Thinkpad has gone the way of commodity. There are too many models and superficially Thinkpads aren’t different from Dells and HP’s other than being black. They need to simplify their line up and add features on high end models that people are willing to pay for, if they want a bigger profit margin.
No, ThinkPads have not gone the way of commodity. I am very outraged by this! I can’t believe that people are actually believing this! I absolutely refuse to believe that. All those comments that you hear are just comming from haters who have nothing better to do than ruin others lifes! A lot of people want a ThinkPad so of course Lenovo is slashing prices and offering more options.
Lenovo IS NOT alienating their business/high-end customers! People, if you have a problem of something that Lenovo is doing, tell them! Otherwise, they won’t know and you’re not going to get the results that you want! They’re listening and they’re doing the best they can.
ThinkPads are and will continue to be premium products. ThinkPads are VERY different from their competitors and that’s all I’m going to get for the rest of my life!
I love the Thinkpad brand and have for many many years. Thinkpad is still a very strong brand..
Has Lenovo overused it? I think so. R,S,T,L,W,X and now Edge, wow, at this rate they will have the whole alphabet covered in a couple of years. I think that now that Edge is out, some of the letters should be converted to Edge models. I do realize that most Thinkpads are sold to large corporations and maybe for them all the lettering works, but in my view, less will be more for the Thinkpad. They also have to stop with the constant sales. Why would I ever buy anything from Lenovo when I know that a coupon is days away and if I am lucky a double coupon. This makes the actual price irrelevant and hurting the brand. When the computers are reviewed the retail price is used, but I don’t think anybody that is looking at Cnet or PcWorld is going to pay the retail price, they will wait for a coupon and save 15-25%. That 15-25% price discount, could have taken the review score form great to amazing – must buy now, editors choice and that would have created more exposure to the product and more people considering it as their new computer.
I know once you discount it is hard to stop, but the constant sales are not good for the brand.
I’ve been a UK buyer of Thinkpads for a number of years now. I buy them because I know they’re a good quality notebook, although recently I’ve been impressed with other brands too. Because of Vista I very nearly didn’t buy another PC….
There are a lot of cheap notebooks, and there’s some cheaper notebooks from very estabilished brands that have an excellent build standard too. Off the shelf they’re exceptionally good. Previously I bought the standard model off a reseller but for my T510 I bought direct. I wanted the FHD screen and another couple of options.
Lenovo’s problems are partly due to their ordering system. On their site you can’t get any information on each of the components you’re ordering. It’s a mystery; three screen resolutions of HD, HD+ and FHD but what actual resolution are they? This goes for just about every option. Even clicking on the Blu Ray option the information would lead you to believe you can write Blu Rays too but you can’t! The limited information they’re offering isn’t even relavent to the product you’re buying. Confused which version of Windows you should buy? When I orderd my T510 I clicked the “Help Me Decide” button and it was still only offering information on Vista – W7 had been out for months and was the only option.
Next is delivery dates. This really has to be a priority. This is compounded by inability to supply certain components. Looking at the T510 this morning and you can’t select either the HD+ or FHD screen, only the low resolution HD screen. Other manufacturers are supply high resolution screens as standard, why Lenovo thinks it can get away offering the lowest resolution is beyond me. Any customer then has to wait in hope that this option becomes available again, and in the knowledge that “2-3 weeks” means “3-4 weeks” at least.
Am I happy with the T510? Yes. Although the last update for the touchpad has made activating scrolling difficult! But the biggest disapointment is Windows 7 itself. It’s slick, it’s fast to boot up, it does some really smart stuff. But it’s really dumb if you want to do simple stuff like a search of your files. What was easy under Windows XP is impossible with W7. Applying filters to searches for date, size etc is shockingly difficult to do, and worse if you want to search emails.
Now looking to buy either an X201 or an Apple Mac. I’m having real difficulty deciding, I like the smaller format of the X201 but I’m thinking the Apple Mac won’t have W7 and that may be an advantage.
I am on my fifth Thinkpad–a new T410. It still has the best keyboard in the business, the pointing stick and quality construction. I have a still-working R31 at home and the build quality of the two is entirely comparable, though the 410 runs rings around it. The T410 is much better built than the Z61m I had previously and that lasted me five years without a hiccup. I wouldn’t expect that of a Dell.
As long as Lenovo continues to build machines with these features, I’ll pay a premium for them, for my personal use, out of my own pocket–and would recommend them over anyone else for business use as well.
I agree with John’s comments above. The Lenovo UK website and tech support seem to be in utter disarray.
I thought they were supposed to be a reputable brand… maybe those days are over.
Update on the touchpad problem I was experiencing. Seems that when the new drivers were installed they switched on filtering for two finger scrolls and even the single finger scroll too.
How to remove this is to do a Fn-F8 and select “Manage Settings”. Then click on the UltraNav tab and on the TouchPad section select Settings. This brings up a menu with loads of options, but it’s the “Smart Check Settings” that we need to expand.
I then
1. Decreased the PalmCheck sensitivity – it was nearly at maximum.
2. Deselected Scrolling Region Filtering.
3. Deselected Gesture Filtering.
Hope this helps.
Anyway, what I’ve said about the order process for Lenovo is easily solved. Just put the correct information on the website, up to date and accurate. It’s not difficult!
And finally, the Lenovos are still excellent machines. My last, a Z60m, is still going. Just whenever a website with Flash comes up it slows down! It’s about 4 years old with the original install of XP and I’m sure a fresh reinstall would help. Even my original A series Thinkpad still gets use when I need to go back to software which only operates under W95 and I need a printer port! The full sized machines work nicely too.
Lenovo keeps cutting good people from their pool of employees. Top performer? Doesn’t matter… You are laid off. Inside corporate or out in the field, their loyal employees that stuck with them through the Lenovo purchase of IBM’s PC Division, are finding their loyalty meant nothing when it comes to the executives, and senior management making their bonuses. Moral is at an all time low.
Now I’m no MBA, but I recognise the pressures they face in the industry and the harsh reality that it brings to their employees in terms of on-going lay off’s every 6 months to a year.
The question is this. When it comes time for real growth will Lenovo have the experienced work force they need as well the numbers of people required to execute in a timely manner?
As for the product. It is only a matter of time before they realise that they can’t cut any more people and must cut corners on the product too.
Bob, you make some very valid points and ones I’ve seen with other companies in the electronics industry. Indeed, you see it with other organisations.
The market won’t stand for corners on the Lenovos to be cut. There’s too many buying Dells, which I’ve always found not quite to be good enough for my tastes. Other brands are becoming very good, but aren’t corporate machines quite yet. And if Apple became more corporate focused with email etc they’d be a real challange (or you could install Windows on a Mac!).
Lenovo, I believe, has to sort out the website for ordering process. Give the correct information. The IdeaPads are a great way to have a “home” notebook separate from the corporate ThinkPads. Overall they’re going about the business correctly. And don’t forget that all the PC industry is down right now!
I buy Lenovos for a reason. I want a machine which will last, and is designed to a high standard. Thinkpads meet my needs. But I have also bought their desktops too!
I think Lenovo should produce mainstream products to insure survival meanwhile it should and must keep high end ThinkPads like TXW series and increase their quality and also increase the price if you want a cheap ThinkPad buy an R or L or Edge but TWX are premium products like Apple’s Macbook Pro’s can’t afford them don’t buy them! bring back the legendary IBM quality current T & W series are very cheap in quality much inferior to previous ThinkPads which I think Is a mistake and much harming the ThinPad name which is a shame, I know many of people That moved to Apple because of Quality issues with latest ThinkPads including me.
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