Lenovo's Data Center Business Aims to Move Forward

Friday Aug 18th 2017 by Sean Michael Kerner
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Nearly three years after acquiring IBM's x86 business, Lenovo is optimistic it can turn things around.

Lenovo reported its first quarter fiscal 2017 financial earnings on Aug. 17, showing some challenges in the company's server and data center business.

Overall, Lenovo reported first quarter revenue of $10 billion, which was flat year-over-year. The company reported a Net Loss of $72 million for the quarter, down from the $173 million in profits reported for the first quarter of fiscal 2016.

Lenovo's Data Center Group (DCG) was hit particularly hard, reporting revenue of $971 million, for an 11 percent year-over-year decline.Lenovo

"The Group continued to execute its transformation plan during the quarter with investments in building direct sales capability, strengthening the channel and product solution capabilities to drive future sustainable profitable growth," Lenovo stated in its financial results filing with the Hong Kong Exchange. "However, the competitive industry landscape and increased component costs continued to pressure the Group performance in the quarter under review."

Lenovo noted that it hired a new leader for the DCG in November, with the appointment of Kirk Skaugen as Executive Vice President and President of the Data Center Group. Though the overall revenue was down for the quarter, Lenovo stated that revenue did in fact grow year over year for the first time in North America and Western Europe, since the acquisition of IBM's System X business.

Lenovo acquired IBM's System X x86 server business in October 2014 for $2.1 billion.

At the Lenovo Transform event in New York City on June 20, 2017, the company launched two brands:  "ThinkSystem" and "ThinkAgile." The two new brands include multiple server and data center hardware products that Lenovo hopes will expand the company's market reach.

"Shortly after Intel Purley's launch, the Group showed its fast time-to-market as it has already begun volume shipping its next generation Intel Xeon products and installed the largest supercomputer in the world on this new Intel platform at Barcelona Supercomputer Center," Lenovo stated.

Though it is optimistic, Lenovo is also realistic in its future outlook, which isn't an entirely smooth road ahead.

"Market conditions remain challenging in the short term; notably, the component supply shortage and cost hike are expected to continue pressuring business operations," Lenovo stated. "However, the Group now has a stronger organization with sharper customer focus and more compelling product portfolio across all our businesses."

Sean Michael Kerner is a senior editor at ServerWatch and InternetNews.com. Follow him on Twitter @TechJournalist.

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