MORRISVILLE – Lenovo stock rallied in Hong Kong early Thursday after the global tech giant disclosed a surge in its latest quarterly revenue that beat analysts’ expectations.

However, the good news was tempered by the fact that Lenovo shares will still be removed from the prestigious Heng Seng index next month after falling more than 50 percent in value since joining it five years ago.

Lenovo also disclosed officially in its earnings results that the company has undergone more reorganization as it attempts to rally a struggling mobile business group. The smartphone operations will now become part of the PC division, the combined groups being led by Chief Operating Officer Gianfranco Lanci.

Mobile business changes

The Personal Computer and Smart Devices Group is now combined with the Mobile Business Group, in what Lenovo calls its Intelligent Devices Group (IDG).

“This new group will further fast-track the company’s innovation leadership and ambitions for growth across the full spectrum of smart devices,” Lenovo said.

“This new structure will create a number of efficiencies by leveraging shared global supply chain and services. IDG will also accelerate Lenovo innovation as communications and computing technologies come together under a single platform to better connect devices, users, applications and content.”

Lenovo also reiterated other changes in mobile:

  • The previously reported naming of Sergio Buniac to lead the business outside of China
  • A realignment of the product portfoliowith new launches planned
  • Channel inventory reduction
  • And a “strategic market review” that it says will  “identify the opportunities for most profitable growth”

“Lenovo remains optimistic that aggressive cost-cutting and exceptionally strong performances by MBG in Latin America (volume grew 40% year-on-year for the full year), or more than 20 times the industry) and North America (volume +57% year-on-year for the full year) are expected to yield substantially improved results as FY2018/19 continues,” the company said in a statement.

Revenue climbs

Revenue across the company climbed to $10.6 billion, an 11 percent increase year-over-year. Analysts quoted by Bloomberg had expected $9.8 billion.

The revenue jump was the first double-digit increase in 2 1/2 years, Lenovo noted.

“Last quarter, we resumed double-digit revenue growth with strong profitability improvement year-on-year, closing the fiscal year with a strong momentum and proving that Lenovo has truly entered a new phase of growth,” said Yang Yuanqing, Lenovo’s Chairman and CEO, in a statement.

“Lenovo’s vision has long been to become a global leader in intelligent transformation. We will focus on building competitiveness in Smart IoT devices, data center infrastructure and vertical intelligent solution, and we are well positioned to take advantage of smart IoT and intelligence era.”

However, net revenue declined year-over-year to $33 million.

For the fiscal year that ended March 31, Lenovo reported a 5 percent increase in revenue to $45.3 billion but recorded a loss of $189 million after taking a $400 million charge. Loss for the year came in at 1.67 US cents per share.

Business group performance

Lenovo, which operates dual headquarters in Beijing and Morrisville, reported progress by its PCs, data center (which is based in RTP) and the mobile business group.

The company said PC-related revenue climbed 16 percent year-over-year to to $7.7 billion, noting the increase as “the highest growth in four years.”

Data center revenue climbed 44 percent year-over-year to $1.2 billion.

Lenovo is No. 2 in global PC sales behind HP.

“Lenovo managed to grow sales in PC as shipments went flat,” Qian Kai, an analyst with CICC, told Bloomberg news. “The revival of the data center business is a good sign, but the size of this part remains small.”