PC and data center company reports product production returning to normal
China-based Lenovo took an early hit from COVID-19 as the pandemic forced the closure of major manufacturing centers in its home country, disrupting supply chains and channel inventory. Nevertheless, the company sees growth ahead in the post-virus work-from-home (WFH) world.
The Lowdown: Over the next two to three years, Lenovo anticipates that the total addressable market for personal computers — notebooks, all-in-one computers, desktops, and workstations — will increase as much as 25% to 30% as more companies choose to keep employees working from home.
The Details: In its latest earnings report, Lenovo said it’s returned to 100% production capacity in China — including its large factory in Wuhan, the epicenter of the COVID-19 pandemic — although it conceded that component shortages continues to hamper output. Lenovo’s profits dove 64% and gross revenue fell nearly 10% in the first quarter due to the pandemic’s fallout. However, the damage wasn’t nearly as bad as analysts expected as the shift to working from home in many parts of the world soaked up existing inventory.
The Impact: A potential increase in PC demand and the total addressable market is welcome news to the tech sector and reseller channel. For much of the past decade, PC demand shrank as users turned to their mobile devices — tablets and smartphones — as their primary connections to the Internet. The end of life for Windows 7 breathed new life into the PC market as businesses and consumers upgraded to Windows 10 devices. The Windows 10 refresh was short-lived, however, and hampered by inventory shortages in the Intel processor supply chain.
According to a survey of chief financial officers (CFOs) by analyst firm Gartner, 73% of companies are planning to keep as much as 50% of their employees working from home after the pandemic. Many technology companies are allowing employees to work from home through the end of the year. Social media giant Twitter said it will allow staff to work from home permanently.
Background: According to Gartner, PC shipments plummeted 12.3% in the first quarter due to the COVID-19 pandemic — the worst quarterly decline since 2013. Despite the downturn and disruptions, Lenovo retained its crown as the world’s largest PC vendor by share, holding 24.4% of the market compared to HP’s 21.5% and Dell’s 19.7%.