2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.Property, plant and equipment 387 392 Intangible...


Our Momentum Gets Stronger and More BalancedStrong Growth

Record market share, closed gap with #1 to less than a point

Record market share in customer and product segments

Record market share in smartphones in China, reached #2 for the first time

Source: IDC

20

15

10

0

1Q4Q3Q2Q4Q3Q2Q1Q

10/11

69

10

20

15

10

5

0

12

1010

677

WW Commercial Share %

WW Consumer Share %

13 14 1513

16

18 17 19

25

15

10

5

12/13

4Q3Q2Q

17

4Q3Q 1Q

11/12

1Q4Q3Q2Q4Q3Q2Q1Q

10/11 12/13

4Q3Q2Q4Q3Q 1Q

11/12

11.2%

1Q

12/13

4Q3Q2Q1Q

11/12

4Q3Q2Q1Q

10/11

PRC Smartphone market share (%)

In June, Lenovo

ranking climbed to

#2 w/ 13.1% share

0.9%

75

20

15

10

5

0

9.5%

7.5%

1.7%

Source: SINO

11.8

15.7

17.6

15.0

2.0

7.0

12.0

17.0

Q2 10/11

Q3 10/11

Q4 10/11

Q1 11/12

Q2 11/12

Q3 11/12

Q4 11/12

Q1 12/13

WW PC Market Share (%)

Lenovo HP Dell Acer ASUS


Our Momentum Gets Stronger and More Balanced

Source: IDC and Internal Data

1Q FY12/13 Share, %

LAS 8.3

BRAZIL 3.7

MEA 6.6

EET 9.4

INDIA 17.1

RUCIS 11.6

ASEAN 8.8

HTK 7.3

ANZ 7.1

JAPAN 25.4

WE 8.3

NA 8.4

PRC 35.2

YTY

+3.9pts

+1.5pts

+2.6pts

+18.6pts

+1.4pts

+1.4pts

+1.7pts

+3.6pts

+6.5pts

+2.7pts

+2.6pts

+0.6pts

+0.4pts

Strong Growth

4 GEOs all deliver stellar performance

1Q 11/12 1Q 12/13

1Q 11/12 1Q 12/13 1Q 11/12 1Q 12/13

+3.9 pts +2.9 pts

1Q 11/12 1Q 12/13

31.435.2

8.75.9

8.4

11.0

6.76.9

+1.5 pts+4.4 pts

PR

CN

A

EM

EA

AP

LA

Lenovo Gains Share in All GEOs(%)


Our Momentum Gets Stronger and More Balanced

Improved Profitability

Net income of 141 million USD, up 30% YTY

PTI of 185 million USD, up 50% YTY

GP Margin improved by more than 1 point QTQ

0

2

4

6

8

10

12

14

Q1 11/12 Q2 11/12 Q3 11/12 Q4 11/12 Q1 12/13

Gross Profit Margin (%)

Operating Margin (%)

2.3%

12%

10.8%

1.4%

Source: Internal Data

109141

0

20

40

60

80

100

120

140

160

180

200

Q2 10/11

Q3 10/11

Q4 10/11

Q1 11/12

Q2 11/12

Q3 11/12

Q4 11/12

Q1 12/13

Lenovo PTI, Net Income (US$M)

185

123

PTI

Net

Income


2009 vs 2012: Similar Situations, Different Results

-20

-10

0

10

20

30

40

50

-20

-10

0

10

20

30

40

50

China vs ROW YTY Shipments Growth (%) Consumer vs Commercial YTY Shipments Growth (%)

China

ROW

Consumer

Commercial

Similarities: China PC market grew slower than ROW, Commercial PC business shrank

Different results for Lenovo

Before 2009: Revenue dropped, losses mounted

Now: Strong growth and improved profitability

Source: IDC and Internal Data


How did we do it?

Right Strategy & Strong Execution

Efficient Business Model

Innovative Products

Diversified Team 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


Right Strategy drives balanced mix and stronger results

Compared to 2008, we almost doubled our annual PC revenue in emerging markets outside China

Our PC consumer business in mature markets grew more than 4 times

Since established in 2011, MIDH doubled, now a billion dollar business

0

5

10

15

20

25

30

35

FY 08/09 FY 09/10 FY 10/11 FY 11/12 Q1 12/13

Attack

Protect

32%

$8.0

Lenovo Revenue Mix (US$B)*

Attack businesses

have grown to

45% of our rev, up

from 32% in

FY08/09

$17.0

67%

$21.6

$29.5

35%

42%

58%65%

45%

55%

33%

Still growing rapidly in Q1 12/13:

Emerging Markets outside China, volume up 39% YTY, 36-point market premium

Global consumer up 43% YTY, a 42-point market premium

China smartphone volume up 44x YTY

68%

$15.3

*FY 08/09 and FY 09/10 each include $0.4B USD in Lenovo Mobile sales, which are included for comparison purposes.


Right Strategy, Strong Execution Secured Healthy, Long-term Profit

Growing share and profitability is hard in this market….but we DID IT!

Strong execution delivered healthy profit in challenging environment

China, Global Commercial maintaining strong profit

EMC Joint Venture strengthens enterprise offerings

New businesses reached double-digit share, entering profitable phase

End game is the same: Make new businesses as profitable as core businesses


Building Our Core Strengths

Clear Strategy and Strong Execution

Efficient Business Model

Innovative Products and Branding

Diversified Team and Culture


Looking Ahead


Financial Summary

US$ MillionQ1 FY2012/13 Q1 FY2011/12 Y/Y% Q/Q%

Sales 8,010 5,920 35% 7%

Gross Profit 959 739 30% 19%

Operating Expenses (777) (616) 26% 10%

Operating Profit 182 123 48% 79%

Other Non-Operating Income 3 0 NA NA

Pre-tax Income 185 123 50% 82%

Taxation (41) (15) 178% 19%

Profit for the period 144 108 33% 114%

Non-controlling interests (3) 0 NA 305%

Profit attributable to Equity Holders 141 108 30% 112%

EPS (US cents)

- Basic 1.37 1.11 0.26 0.72

- Diluted 1.33 1.08 0.25 0.70

Q1 FY2012/13 Q1 FY2011/12 Q4 2011/12

Gross margin 12.0% 12.5% 10.8%

E/R ratio 9.7% 10.4% 9.4%

Operating margin 2.3% 2.1% 1.4%

PTI margin 2.3% 2.1% 1.4%

Net margin attributable to Equity Holders 1.8% 1.8% 0.9%


Condensed Balance Sheet

US$ Million As at As at

Jun 30, 2012 Mar 31, 2012

Non-current assets 4,008 4,040

Property, plant and equipment 387 392

Intangible assets 3,039 3,092

Others 582 556

Current assets 11,777 11,820

Bank deposits and cash 3,766 4,171

Trade, notes and other receivables 6,350 6,297

Inventories 1,510 1,218

Others 151 134

Current liabilities 11,471 11,809

Short-term bank loans 41 63

Trade, notes and other payables 10,962 11,251

Others 468 495

Net current assets 306 11

Non-current liabilities 1,846 1,603

Total equity 2,468 2,448


Cash and Working Capital

US$ Million Q1 FY2012/13 Q1 FY2011/12 Q4 FY2011/12

Bank deposits and cash 3,766 3,899 4,171

Total Bank Borrowings 41 261 63

Net Cash Reserves 3,725 3,638 4,108

Days Inventory 19 16 18

Days Receivable 34 29 35

Days Payable 66 72 70

Cash Conversion Cycle -13 days -27 days -17 days


Q1 FY13: Performance By GeographyChina

– Unit shipments +9.2%YTY vs. market growth at -2.8%

– Driven by higher exposure in fast growing emerging cities and win across the board

– Stable PC margin; continue to invest in mobile internet business

APLA– Unit shipments +59.2%YTY vs. market growth at -3.9%

– Share gains in all regions led APLA market share to 11.0%(+4.4pts YTY)

– #1 position in Japan and India

EMEA– Unit shipments +62.3%YTY vs. market growth at +9.1%

– Share gains in all regions led EMEA market share to 8.7%(+2.9pts YTY)

– Strong profitable growth with margin improvements

NA– Unit shipments +8.6%YTY vs. market growth at -10.3%

– Strong share gains led NA market share to 8.4%(+1.5pts YTY)

– #3 Position in US commercial PC and #3 in US commercial DT

# 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 .

Q1

FY13Y/Y Q/Q

Q1

FY13

Q1

FY12^

Q4

FY12^

Q1

FY13

Q1

FY12^

Q4

FY12^

China 3,520 24% 21% 170 162 100 4.8% 5.7% 3.4%

China - PC # 2,971 13% 18% 192 169 120 6.5% 6.5% 4.8%

APLA 1,725 72% -3% 0 (4) 0 0.0% -0.4% 0.0%

EMEA 1,584 62% -9% 23 4 16 1.4% 0.4% 0.9%

North America 1,181 7% 10% 46 52 33 3.9% 4.7% 3.1%

US$ Million US$ Million Profit MarginIncluding MIDH and non-PC revenue &

results

Sales Segment Operating Profit/ (Loss) Segment Operating


Q1 FY13: Performance By Product

Notebook– Shipments up 27% YTY, outgrow the market(+0% YTY); Sales up

23% YTY

– Record high market share in WW NB: 15.4%(+3.2pts YTY)

Desktop– Shipments up 21% YTY, outgrow the market(-4% YTY); Sales up

26% YTY

– Market share up 3.0pts YTY to 14.4%

MIDH– MIDH Sales up 173% YTY

– Smartphones shipments grew 37x faster than the market & rank as top 2 brand in China

– Tablets continued to show good momentum; shipments up around 1.2x in China and 2.8x in WW

(3.6%)

MIDH7.3%

Revenue by Product

Desktop31.8%

(34.2%)

Notebook54.1%

(59.7%)

(2.5%)

Others* 6.8%

* Note: miscellaneous businesses including servers, services and software and Medion's non-PC business.

Appendix

• Consolidated Income Statement

• Condensed Consolidated Cash Flow Statement

• Segment Reclassification - FY 12 Q1 – Q4


Consolidated Income Statement

US$ Million Q1 2012/13 Q1 2011/12

Sales 8,010 5,920

Cost of sales (7,051) (5,181)

Gross profit 959 739

Selling and distribution expenses (446) (349)

Administrative expenses (194) (174)

Research and development expenses (135) (78)

Other operating expenses - net (2) (15)

Operating profit 182 123

Finance income 11 8

Finance costs (8) (8)

Profit before taxation 185 123

Taxation (41) (15)

Profit for the period 144 108

Profit attributable to:

Equity holders of the company 141 108

Non-controlling intersts 3 -

Dividend - -

Earnings/(Loss) per share (US cents)

- Basic 1.37 1.11

- Diluted 1.33 1.08


Condensed Consolidated Cash Flow Statement

US$ Million Q1 FY2012/13 Q1 FY2011/12

Net cash (used in)/generated from operating activities (334) 919

Net cash generated from/(used in) investing activities 153 (43)

Net cash generated from/(used in) financing activities 11 (9)

(Decrease)/Increase in cash and cash equivalents (170) 867

Effect of foreign exchange rate changes (25) 21

Cash and cash equivalents at the beginning of the period 3,758 2,954

Cash and cash equivalents at the end of the period 3,563 3,842


Segment Reclassification - FY 12 Q1 – Q4

Including MIDH and

non-PC revenue & results

Sales Segment Operating Profit/ (Loss) Segment OperatingUS$ Million US$ Million Profit Margin

Q1

FY12

Q2

FY12

Q3

FY12

Q4

FY12FY12

Q1

FY12

Q2

FY12

Q3

FY12

Q4

FY12FY12

Q1

FY12

Q2

FY12

Q3

FY12

Q4

FY12FY12

China 2,836 3,175 3,483 2,901 12,395 162 140 166 100 568 5.7% 4.4% 4.8% 3.4% 4.6%

China – PC# 2,621 2,923 2,994 2,517 11,055 169 167 181 120 637 6.5% 5.7% 6.0% 4.8% 5.7%

APLA 1,001 1,865 1,690 1,781 6,337 (4) 7 (4) - (1) -0.4% 0.4% -0.2% 0.0% -0.01%

EMEA 978 1,599 1,974 1,745 6,296 4 23 40 16 83 0.4% 1.4% 2.0% 0.9% 1.3%

North America 1,105 1,147 1,224 1,069 4,545 52 39 38 33 162 4.7% 3.4% 3.1% 3.1% 3.5%

After Reclassification^:

# 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

2012 LENOVO CONFIDENTIAL. ALL RIGHTS RESERVED.Property, plant and equipment 387 392 Intangible...

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