In February 2022, Lenovo shared a somewhat special figure: $17 million. It is the first profit made by its Infrastructure Solutions Group (ISG) since its predecessor was formed by the 2014 acquisition of IBM’s x86 server business.
Yesterday, Lenovo revealed another big number: four. This is the number of quarters in which ISG has made a profit.
A full year of black ink is a nice turnaround, except for one small problem: ISG only makes a trickle of profit.
The register did the sums, and in those four profitable quarters, ISG earned $8 billion in revenue and made $71 million in profit.
Here are the profit year numbers, with amounts in millions of dollars:
Lenovo’s ISG earnings aren’t hugely worse than those of the two companies it’s chasing in the enterprise hardware market: HPE and Dell. Each company groups different products under its company numbers, so direct comparisons are difficult.
But where Lenovo stands out is in its small size. Dell’s enterprise hardware business is worth $9.5 billion per quarter, while HPE earns around $6 billion per quarter.
Lenovo points to recently significantly expanding its enterprise hardware lineup as one of the reasons it can turn last year’s black ink into long-term success.
Yesterday’s third quarter earnings announcement saw ISG Chairman Kirk Skaugen explain Lenovo’s plan.
“We had cloud records, all-time records, as well as a second-quarter record in enterprise and small and medium enterprises,” he told investors, adding that the group has also released “records in the traditional and hyper-converged NAS and SAN markets and in cloud-based storage.”
“It was on a large scale geographically with all-time records in Europe, Asia, the Pacific and America.”
But while leaders of Lenovo’s PC-centric smart devices group and consultant-led Solutions and Services Group (SSG) both talked about working to defend and improve margins, Skaugen did not. .
So ISG seems far from its worst days – when Lenovo shut down using its PC sales force to move servers. But it remains to be seen how it manages a low-profit business while facing bigger and wealthier rivals, even as the cloud continues to offer buyers all sorts of alternatives to on-premises hardware. ®