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2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.2
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.3
Our Momentum Gets Stronger and More Balanced
Strong Growth Across the Board
Record market share, closed gap with #1 to only 0.2pt
#1 in WW consumer for first time, #2 in WW commercial
17.415.8
13.115.6
2
7
12
17
Q3 10/11
Q4 10/11
Q1 11/12
Q2 11/12
Q3 11/12
Q4 11/12
Q1 12/13
Q2 12/13
WW Market Share (%)
HP Lenovo Dell Acer ASUS
0
5
10
15
20
25
Q3 10/11
Q4 10/11
Q1 11/12
Q2 11/12
Q3 11/12
Q4 11/12
Q1 12/13
Q2 12/13
HP Lenovo Dell Acer ASUS
0
5
10
15
20
Q3 10/11
Q4 10/11
Q1 11/12
Q2 11/12
Q3 11/12
Q4 11/12
Q1 12/13
Q2 12/13
HP Lenovo Dell Acer ASUS
13.4 18.3
18.8
WW Consumer Market Share (%) WW Commercial Market Share (%)
13.2
Source: IDC
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.4
Our Momentum Gets Stronger and More Balanced
Source: IDC and Internal Data
7.810.8
2Q 11/12 2Q 12/13
6.88.4
2Q 11/12 2Q 12/13
9.8
11.5
2Q 11/12 2Q 12/13
+2.4 pts +3.0 pts
31.233.7
2Q 11/12 2Q 12/13
+1.5 pts+1.6 pts
PR
CN
A
EM
EA
AP
LA
Lenovo PC Gains Share in All GEOs(%)
All GEOs delivered stellar PC performance with margin improvement
Mobile Internet business helped drive China’s 20% growth YTY
China smartphone sales 18x growth YTY, a point away from market leader
1Q
12/13
4Q3Q2Q1Q
11/12
4Q3Q2Q1Q
10/11
PRC Smartphone market share (%)
15.3
14.2
0
5
10
15
20
25
Source: SINO
Huawei
Coolpad
ZTE
Samsung
2Q
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.5
Strong Growth with Improved Profitability
PTI Margin improved 0.3 points YTY
Record-high PTI of 204 million USD, up 24% YTY
Net income of 162 million USD, up 13% YTY
Source: Internal Data
PTI
Lenovo PTI and PTI Margin(US$M, %)
1
1.5
2
2.5
3
0
25
50
75
100
125
150
175
200
225
Q2 10/11 Q3 10/11 Q4 10/11 Q1 11/12 Q2 11/12 Q3 11/12 Q4 11/12 Q1 12/13 Q2 12/13
204
102
165
1.8%
2.1%
2.4%
PTI Margin
+24%
+0.3 pts
PTI PTI Margin
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.6
Key to Success
Right Strategy & Strong Execution
Efficient Business Model
Innovative Products
Diversified Team
Global Culture
China
Mature Rel
Extend PC share lead
Increase profitability
Grow commercial with Server and
workstation
1
2
3
Deliver steady profits in all regions
Drive share gain across the board
1
2
Protect
Mature TM
REM
Grow our MIDH presence globally
-Pad / Phone / Smart TV in China
-Global Pad offering
Drive convergence (cloud devices,
killer apps, best user experience)
1
2
Get 10%+ share in key countries
Attack SMB/consumer & move to profitability
1
2
Grow share through Home/SMB
and retail channels
Expand attach business to drive profitability
1
2
MIDH
Attack
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.7
Right Strategy Drives Balanced Performance
0
5
10
15
20
25
30
35
FY 09/10 FY 10/11 FY 11/12 Q1 FY12/13 Q2 FY12/13
Attack
Protect
$8.0
Increasing Revenue Mix From Attack(US$B)*
$17.0
67%
$21.6
$29.5
35%
42%
58%65%
45%
55%
33%
*FY 08/09 and FY 09/10 each include $0.4B USD in Lenovo
Mobile sales, which are included for comparison purposes.
Protect: China and WW commercial maintained leadership, improved profitability
Attack: REM/Mature Transactional now in profitable growth stage with hyper growth of scale
Attack: MIDH 8% of company revenue, China smartphone profitable in a couple quarters
Protect Attack
MM
Re
lP
RC
Sm
art
ph
on
eM
M T
ran
sR
EM
50
0
-50
+8
1Q4Q3Q
+11
50
0
-50
2Q1Q4Q3Q2Q
+32
100
-50
0
50
40
80
0
-40 +21
120
4Q3Q1Q4Q
4,000
1Q
3,000
2,000
2Q
1,000
0
+1,706
2Q3Q
MarketLenovo
Lenovo: +8%
Market: 0%
Lenovo: 0%
Market (est.): -11%
Lenovo: +25%
Market: -7%
Lenovo: +8%
Market: (est.): -13%
Lenovo : +1837 %
Market : +131%
FY 10/11 FY 11/12 FY 12/13FY 10/11 FY 11/12 FY 12/13
46%
54%
$8.7
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.8
Building Core Strengths: Business Model and Team/Culture
Refine business model by leveraging local advantages in R&T and in house manufacturing in key markets
Strengthen the diversified team and culture.
Establish a Global/Local Company
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.9
Building Core Strengths: Innovation
Ready to capture opportunity Windows8 brings to the industry
Convertible notebooks create more compelling PC+ choices
Will introduce more exciting products at CES
YogaTwist
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.10
Looking Ahead
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.11
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.12
Financial Summary
US$ MillionQ2 FY2012/13 Q2 FY2011/12 Y/Y% Q/Q%
Interim
FY2012/13Y/Y%
Sales 8,672 7,786 11% 8% 16,682 22%
Gross Profit 1,050 947 11% 10% 2,009 19%
Operating Expenses (844) (781) 8% 9% (1,621) 16%
Operating Profit 206 166 24% 13% 388 34%
Other Non-Operating Expenses / (Income) (2) (1) 47% NA 1 NA
Pre-tax Income 204 165 24% 10% 389 35%
Taxation (41) (20) 103% 0% (82) 134%
Profit For The Period 163 145 13% 13% 307 21%
Non-Controlling Interests (1) (1) 12% -73% (4) 421%
Profit Attributable to Equity Holders 162 144 13% 15% 303 20%
EPS (US cents)
- Basic 1.58 1.41 0.17 0.21 2.95 0.42
- Diluted 1.55 1.38 0.17 0.22 2.89 0.43
Dividend per share (HK cents) 4.50 0.70
Q2 FY2012/13 Q2 FY2011/12 Q1 FY2012/13
Gross margin 12.1% 12.2% 12.0%
E/R ratio 9.7% 10.0% 9.7%
Operating margin 2.4% 2.1% 2.3%
PTI margin 2.4% 2.1% 2.3%
Net margin attributable to Equity Holders 1.9% 1.9% 1.8%
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.13
Condensed Balance SheetUS$ Million As at As at
Sep 30, 2012 Jun 30, 2012
Non-current assets 4,154 4,008
Property, plant and equipment 399 387
Intangible assets 3,086 3,039
Others 669 582
Current assets 12,558 11,777
Bank deposits and cash 3,875 3,766
Trade, notes and other receivables 7,033 6,350
Inventories 1,540 1,510
Others 110 151
Current liabilities 12,077 11,471
Short-term bank loans 24 41
Trade, notes and other payables 11,506 10,962
Others 547 468
Net current assets 481 306
Non-current liabilities 2,241 1,846
Total equity 2,394 2,468
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.14
Cash and Working Capital
US$ Million Q2 FY2012/13 Q2 FY2011/12 Q1 FY2012/13
Bank deposits and cash 3,875 4,223 3,766
Total Bank Borrowings 324 259 41
Net Cash Reserves 3,551 3,964 3,725
Days Inventory 19 18 19
Days Receivable 33 33 34
Days Payable 61 71 66
Cash Conversion Cycle -9 days -20 days -13 days
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.15
Q2 FY13: Performance By Geography
# Financials on China PC extracted from management report are not presented as a separate reportable segment in external report and are shown for reference only.
^ Reclassified after the adoption of new Geo structure and shared expenses allocation .
Including MIDH and
non-PC revenue & results
Sales Segment Operating Profit Segment OperatingUS$ Million US$ Million Profit Margin
Q2
FY13Y/Y Q/Q
Q2
FY13
Q2
FY12^
Q1
FY13
Q2
FY13
Q2
FY12^
Q1
FY13
China 3,822 20% 9% 163 140 170 4.3% 4.4% 4.8%
China - PC# 3,146 8% 6% 185 167 192 5.9% 5.7% 6.5%
APLA 1,825 -2% 6% 15 7 0 0.8% 0.4% 0.0%
EMEA 1,793 12% 13% 36 23 23 2.0% 1.4% 1.4%
North America 1,232 7% 4% 45 39 46 3.6% 3.4% 3.9%
China
• Total revenue of China up 20% driven by 1.7x revenue growth of MIDH
• PC volume up 8% YTY, 8%-market premium, benefited from high exposure in emerging cities & urbanization
• China PC operating margin up 0.2pt to 5.9%• MIDH profitability continued to improve
APLA
• Record market share• PC volume up 5% YTY, 15%-market premium• #1 in Japan & India• Operating margin doubled to 0.8%
EMEA• Became #3; Record market share, 1st time share >10%• PC volume up 27% YTY, 35%-market premium• #1 in Germany, Russia & Denmark• EMEA consumer business became profitable• Operating margin up 0.6pt to 2.0%
NA• Record market share in US• PC volume up 8% YTY, 20%-market premium• Operating margin up 0.2pt to 3.6%
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.16
Q2 FY13: Performance By Product
Notebook– Shipments up 11% YTY, 18% market premium; Sales up 3%
YTY
– Record high market share at 15.9%, up 2.6pts YTY
Desktop– Shipments up 9% YTY, 18% market premium; Sales up 5%
YTY
– Record high market share at 15.3%, up 2.6pts YTY
MIDH– MIDH Sales up 1.5x YTY
– Strong smartphone volume growth of 18x YTY; #2 in PRC with 14.2% market share
– #2 in PRC tablet market; WW tablet volume doubled YTY
(3.6%)
MIDH
8.3%
Revenue by Product
Desktop
32.1%
(34.1%)
Notebook
53.2%
(57.5%)
(4.8%)
Others*
6.4%
* Note: miscellaneous businesses including servers, services and
software and Medion's non-PC business.
Appendix
• Consolidated Income Statement
• Condensed Consolidated Cash Flow Statement
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.18
Consolidated Income Statement
US$ Million Q2 2012/13 Q2 2011/12 Interim FY2012/13 Interim 2011/12
Sales 8,672 7,786 16,682 13,706
Cost of sales (7,622) (6,839) (14,673) (12,020)
Gross profit 1,050 947 2,009 1,686
Selling and distribution expenses (489) (458) (935) (808)
Administrative expenses (198) (197) (392) (371)
Research and development expenses (153) (119) (288) (196)
Other operating expense - net (4) (7) (6) (22)
Operating profit 206 166 388 289
Finance income 10 10 21 19
Finance costs (11) (11) (19) (20)
Share of losses of associated companies (1) - (1) -
Profit before taxation 204 165 389 288
Taxation (41) (20) (82) (35)
Profit for the period 163 145 307 253
Profit attributable to:
Non-controlling interests 1 1 4 1
Equity holders of the company 162 144 303 252
Dividend - - 60 50
Earnings per share (US cents)
- Basic 1.58 1.41 2.95 2.53
- Diluted 1.55 1.38 2.89 2.46
2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.19
Condensed Consolidated Cash Flow Statement
US$ Million Q2 FY2012/13 Q2 FY2011/12 Q1 FY2012/13
Net cash generated from/(used in) operating activities 143 627 (334)
Net cash (used in) / generated from investing activities (328) (227) 153
Net cash generated from/(used in) financing activities 58 (66) 11
(Decrease)/Increase in cash and cash equivalents (127) 334 (170)
Effect of foreign exchange rate changes 18 (7) (25)
Cash and cash equivalents at the beginning of the period 3,563 3,842 3,758
Cash and cash equivalents at the end of the period 3,454 4,169 3,563