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Lenovo Data Center, Server and Storage Revenues Gain Momentum

Lenovo’s data center business grew revenues 68 percent to $1.6 billion in the first quarter of fiscal 2019 — the strongest growth since the PC company acquired the x86 server business from IBM in 2014, according to President and CEO Yang Yuanqing (pictured).

The statistics and comments surfaced during Lenovo’s fiscal Q1 2019 earnings call earlier this week. The company’s overall results were surprisingly strong, considering revenue and business challenges that the company faced less than a year ago.

Yuanqing and Group CFO Wong Wai Ming shared additional data center anecdotes, including:

  • Profitability for the data center business improved 11 points year-on-year, accelerating double-digit growth for the third consecutive quarter, driven by software-defined infrastructure, high-performance computing and artificial intelligence and hyperscale.
  • North America achieved high triple-digit growth, which represents the fifth consecutive quarter of growth
  • In China, the data center business delivered record revenue in Q1 with more than 50 percent growth year-on-year.
  • Traditional infrastructure areas like flash-based storage solutions grew more than 40 percent year-on-year.

Still, the data center business generated a pretax loss of $63 million.

Lenovo Data Center: Next Moves

To drive growth and march toward profitability, the company plans to  move more aggressively into areas like NFV (Network Functions Virtualization) and edge computing, while continuing investments in software-defined infrastructure, artificial intelligence, storage and networking.

While many hardware companies turn to outsourced manufacturing these days, Lenovo will continue to leverage an in-house design and manufacturing business model, which the company considers competitive differentiators.

“For the data center business, we are confident to deliver sustainable profitable growth over time,” Wai Ming added.

In terms of partnerships, he pointed to growing momentum with Cloudistics, VMware, Nutanix Microsoft and Pivot3.

Lenovo Partner Engagements

Lenovo has also been mending fences with channel partners. Amid weak revenues and internal layoffs in 2017, the company alienated some partners with program changes that year, and highly respected channel chief Sammy Kinlaw exited to join Lexmark International in early 2018.

Rob Cato

The company began to rebuild relationships in time for the Lenovo Accelerate 2018 conference in May. Among the key moves: Naming Rob Cato, a well-known partner advocate, as executive director of North American channels in April 2018.

Despite the recent progress, the company continues to face intense competition from such data center hardware rivals as Dell Technologies and HP Enterprise.

Lenovo will attempt to accelerate its recent momentum in September, when the company is scheduled to host an innovation-focused gathering in New York. We’ll share more details at that time.

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