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Lenovo “optimistic” AI across product lineup will energize earnings

Written by Nikkei Asia Published on   3 mins read

The chairman spoke freely but avoided questions regarding business in Russia.

Lenovo Group, the world’s largest maker of personal computers by volume, is counting on demand for artificial intelligence powering an earnings recovery, as it moves to embrace the technology across its lineup of devices and services.

Yang Yuanqing, chairman and CEO of the Chinese tech company, repeated several times during its annual earnings press conference on May 23 how “optimistic” he is about the prospects for AI. When asked specifically about any downside risks, not just from AI but for the company as a whole, he again stressed AI’s bright future.

“Definitely, we are optimistic on AI,” said Yang, adding that it will “transform all our businesses.” He expects that AI will not only enhance its core PC business but also those for tablets and smartphones as well as infrastructure and services. And he believes the new AI-driven business cycle could have a long life.

In the post-pandemic sluggishness that has dragged on much longer than Yang earlier anticipated, AI appears to be the only savior in sight for the company, which still relies on PCs for over half its revenue.

While it saw an uptick in performance in the latest January to March quarter, the financial year ended in March was another tough one. Annual revenue dropped by 8% on the year to USD 56.86 billion, with its net profit slipping by 37% to USD 1.01 billion, marking two consecutive years of both top and bottom lines decreasing.

“Despite China’s struggles, the recovery is expected to continue in 2024, as newer AI PCs hit shelves later this year and as commercial buyers begin refreshing the PCs that were purchased during the pandemic,” predicted Jitesh Ubrani, research manager with IDC. First-quarter global PC shipments came to 59.8 million units, inching close to the pre-pandemic first-quarter tally in 2019 of 60.5 million units.

Lifting the hopes even higher are the elevated prices PC manufacturers like Lenovo are likely to be able to charge for AI-focused PCs. “Along with growth in shipments, AI PCs are also expected to carry higher price tags, providing further opportunity for PC and component makers,” Ubrani said.

At the briefing, Yang noted Lenovo had reached 40 years since its inception. “For our fifth decade, probably the key thing will be AI,” he said.

Luca Rossi, the company’s executive vice president and president of the business segment in charge of devices, explained that there are already “more than a dozen” AI-related devices being launched under his watch, and the offerings will only increase. By 2026, he predicted that over half of the entire product mix will be AI-related.

While all six executives at the May 23 press conference talked about AI in their respective segments of Lenovo’s operations, they went quiet when asked about the state of the company’s business in Russia, from which key American competitors Dell and HP withdrew after the full-scale invasion of Ukraine in 2022.

Yang had been speaking freely and eloquently on other questions including the company’s geographic mix—boasting how well “balanced” its businesses are across the globe. But he dodged the inquiry on Russia.

Pressed by a reporter, the company spokesperson who was running the news conference cut in and said, “We comply with the regulations, as we previously said.” She did not elaborate. After the briefing, she told Nikkei Asia that the executives “didn’t answer, so I did.”

Nikkei Asia also approached Yang afterwards and asked for his comments on the Russia business, only to be blocked by staff.

According to the website of Yale University School of Management’s Chief Executive Leadership Institute (CELI), which has monitored corporate action in Russia since the Ukraine invasion, more than 1,000 companies worldwide had publicly announced a voluntary curtailment of their operations in the country as of Thursday.

However, CELI says that “some companies have continued to operate in Russia undeterred.” Based on CELI’s observations, Lenovo is one of the 174 companies which are “buying time” by “postponing future planned investment/development/marketing while continuing substantive business.”

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.


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