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Lenovo Group Limited 2003/04 Annual Results Announcement Results Review

Lenovo Group Limited 2003/04 Annual Results Announcement Results Review. June 2, 2004. Market Review. After adjustments in 2002, China IT market entered into a new phase of growth in 2003. Market value grew 11.1% yoy

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Lenovo Group Limited 2003/04 Annual Results Announcement Results Review

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  1. Lenovo Group Limited2003/04 Annual Results AnnouncementResults Review June 2, 2004

  2. Market Review • After adjustments in 2002, China IT market entered into a new phase of growth in 2003. Market value grew 11.1% yoy • In FY2003/04, unit shipment and revenue of China PC market grew 18.3% and 9.8% respectively • SMEs and local municipal markets expanded significantly • Notebook computer market recorded a significant growth of 77% in unit shipment, benefiting from price reduction and rapidly increasing market demand • SARS outbreak in 2003 stimulated short-term consumer PC sales. Consumer notebook computer market emerging • Mobile handset shipment grew about 9.3% in 2003 • Promoted by massive launch of new generation handsets and aggressive marketing of value added digital services by telecommunications providers • Market overall profit level lowered as some manufacturers sought to reduce the stock of monochrome handsets

  3. Business Review Consumer Desktop Q4: 4.0% FY: 15.1% Commercial Desktop Q4: 12.4% FY: 10.7% Notebook Q4: 46.7% FY: 51.0% Server Q4: 1.1% FY: 13.0% Unit Shipment Growth of Lenovo PC in FY2003/04 • Turnover grew 14.5% in FY2003/04. Operating expenses increased as a result of establishing new businesses and continued investments in R&D, net profit only increased 3.5% • Turnover of core PC business increased 11.7% yoy, higher than market growth of 9.8%. Lenovo PC shipment increased 11.5% in Q4 and 15.1% for the full year. Lenovo accounted for 27.0% of China PC market in CY2003 • Steady development of new business • Mobile handset shipment met full year target with a yoy growth of 90%; self-developed handsets accounted for 64% of the total shipment for the full year • Printer shipment increased 74% yoy • Turnover of IT service business grew 198%

  4. Overview

  5. 2003/04 Consolidated Profit & Loss Account

  6. 2003/04 Turnover Breakdown IT Service2.4% (0.9%) Contract Manufacturing 3.8% (4.9%) Handheld Device 8.8% (7.1%) Corporate IT 51.5% (53.4%) Consumer IT 33.5% (33.7%) Note 1: FY2002/03 figures are in brackets.

  7. Changes in Turnover Breakdown (Full Year)

  8. Changes in Turnover Breakdown (Q4)

  9. Changes in Operating Profit Breakdown (Full Year) Note 2: Operating profit for FY2002/03 and FY2003/04 before amortization of goodwill and gains/(losses) on disposal of subsidiary and investment securities.

  10. Changes in Operating Profit Breakdown (Q4) Note 2: Operating profit for FY2002/03 and FY2003/04 before amortization of goodwill and gains/(losses) on disposal of subsidiary and investment securities.

  11. Gross Margin Analysis (Full Year) Corporate IT ConsumerIT Handheld Device ITService Contract Manufacturing (Note 3) Group Note 3: Before elimination of inter-company transaction, the gross margin of contract manufacturing business is 5.5% (2002/03: 9.6%)

  12. Gross Margin Analysis (Q4) Corporate IT ConsumerIT Handheld Device ITService Contract Manufacturing (Note 3) Group Note 3: Before elimination of inter-company transaction, the gross margin of contract manufacturing business is 2.0% (2002/03 Q4: 9.7%)

  13. Operating Expenses Analysis (Full Year)

  14. Consolidated Balance Sheet

  15. Key Financial Figures

  16. Lenovo Group Limited2003/04 Annual Results AnnouncementProspect June 2, 2004

  17. Our Reform • Focus • Reform on business model • Improve efficiency

  18. An Update on Reform Implementation • Non-core business • Adjust or create a new operational system • Core business • Implemented structural adjustments • Strengthen internal coordination • Integrate market resources

  19. The Next Step • Reform’s fundamental principle： • Be closer to customers, win more customers, and serve customers on a long-term basis • Business model reform： • Build an effective combined sales model targeting at different types of customers • Integrate front and back end to create a timely and countable operational system • Improve compensation system to build an effective sales team

  20. Our aspiration “A technology driven, service oriented, and international Lenovo”

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