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From the application acceptance to the termination, Lenovo’s journey to pursue an IPO on the Science and Technology Innovation Board only lasted for a short period of 8 days. On October 8, the Shanghai Stock Exchange Science and Technology Innovation Board project dynamics showed that Lenovo voluntarily withdrew its application for issuance and listing, so the listing process was terminated.

Afterwards, Lenovo issued an announcement in the Hong Kong stock market, responding that “considering the company’s business scale and complexity, the financial information in the prospectus may expire during the review process of the application. At the same time, prudently consider capital such as the latest issuance and listing. After the relevant market situation, the company decided to withdraw the application for listing and trading of China Depositary Receipts on the Science and Technology Innovation Board.”

After Lenovo’s IPO on the STAR Market came to an abrupt end, it caused a lot of heated public opinion. Some people believed that Lenovo’s IPO might be hindered by external forces. Unlike start-ups, IPOs are not required to raise huge sums of money.

(The picture comes from Canva can draw)

Lenovo is not short of money

Judging from the frequent reform of the financial market system in recent years, the positioning of the Science and Technology Innovation Board is actually to provide sufficient, timely and continuous financial assistance to technology companies with obvious capital needs, thereby helping them to develop reliably and stably.

Does Lenovo have obvious capital needs? According to the prospectus submitted by Lenovo, this IPO Lenovo originally planned to raise 10.014 billion yuan, which will be used in three aspects: intelligent project investment, industrial strategic investment, and supplementary liquidity.

It seems that Lenovo has a lot of capital needs, and considering that Lenovo has accelerated its transformation to intelligence in recent years, it needs to continue to make high-intensity investment for future layout, so these places that need to spend money do make sense.

But the key is that Lenovo’s current profitability can fully support the financing amount demanded by itself. According to the prospectus, Lenovo’s revenue in the last three full fiscal years reached 342.38 billion, 352.68 billion, and 411.62 billion, respectively, and the profit for the year was 4.41 billion, 5.59 billion, and 8.9 billion, respectively.

In addition, as of March 31, 2021, Lenovo’s total cash and cash equivalents reached 20.55 billion, which is huge. Lenovo itself also stated in the prospectus that “the company’s monetary funds mainly come from business activities, borrowing and issuance of bonds and other activities. The expansion of the company’s business and the good management of accounts receivable make the company’s monetary funds more abundant, which can meet the company’s daily business activities. needs.”

No matter how you look at it, Lenovo does not look like a company that lacks money to develop, and many companies listed on the Science and Technology Innovation Board actually have very small profit scales, and are even in the stage of unprofitability, so there is a very strong demand for funds. Since there is no shortage of money, Lenovo has lost a sufficient reason to land on the Science and Technology Innovation Board. This time, it is completely understandable to withdraw.

But aside from the topic of whether Lenovo should IPO, the failure of the Sci-tech Innovation Board just reflects some of Lenovo’s current development problems.

Transformation is not ideal

In 2018, Lenovo started a comprehensive intelligent transformation and began to adjust its internal business structure. In 2019, it proposed a 3S strategy to further focus on three specific directions: intelligent Internet of Things, intelligent infrastructure and industry intelligence.

The core of Lenovo’s intelligent transformation is actually two aspects, one is the interconnection of life equipment terminals, and the other is the cloud and big data upgrade of enterprises and industries. The former can refer to Xiaomi Huawei’s ecology, and the latter can refer to BAT’s industrial empowerment route.

Intelligent transformation can enable Lenovo to grasp the life entrance of the consumer side and the business entrance of the industry side. This is the ideal blueprint for the transformation envisaged by Lenovo, but the reality is not as expected.

Lenovo’s revenue and non-profits have grown significantly in the most recent fiscal year, but it is difficult to see the results of intelligent transformation.

First, the PC business is still strong, and the mobile phone business is even weaker. The prospectus shows that the PC share of Lenovo’s smart devices has further increased, from about 75.39% in the 2018/19 fiscal year to 79.87% in the 2020/21 fiscal year, while mobile devices, that is, smartphones, accounted for 79.87% of revenue. The ratio has fallen, from 12.66% in the 2018/19 fiscal year to 9.33% in the 2020/21 fiscal year.

Although Lenovo’s PC business continues to grow due to external demand and internal product structure adjustments, the core device of the Smart Life IoT is still a mobile phone, and Lenovo’s smart life device ecosystem is not rich enough, so the overall smart IoT synergy is actually Very weak, and compared with Apple, Xiaomi, etc., there is still a clear gap.

Second, the contribution of the data center business is still relatively small. The prospectus shows that in the 2018/19 fiscal year, Lenovo’s smart devices and data centers accounted for 88.2% and 11.8% of revenue, respectively, while in the 2020/21 fiscal year, the proportions became 89.58% and 10%. .42%.

The data center is the cloud and data business to the B side, which is the key for Lenovo to realize the two Ss (intelligent infrastructure and industry intelligence) in the 3S, but the continuous decline in the proportion shows that this business has not yet become Lenovo’s core engine or Speaking of the main business, the reason is probably that there are too many strong competitors in the market, such as AWS, Ali, Google, etc.

The reason why Lenovo chooses continuous transformation is to get rid of the business model driven by a single business and seek more diversified realization space. But now, Lenovo can still be defined as a PC company, and intelligent transformation still has a long way to go for Lenovo.

R&D is hard

Why Lenovo’s intelligent transformation has no obvious effect, and it is difficult to get rid of the decisive driving development state of the PC business. Previously, there was a popular view that Lenovo’s technological strength was not strong, and its role in the PC business was more inclined to assembly, so it was difficult to make breakthroughs in other fields with high technical requirements.

This is not unreasonable. Lenovo’s intelligent transformation needs to break through two typical fields, one is pan-intelligent consumer devices, and the other is cloud computing and big data services. The former has high requirements on ecological richness and connectivity, while the latter has high requirements on technical strength and facility scale.

Judging from the past competition history, these two fields require extremely strong technical barriers, or technical barriers are critical. For example, the Internet of Things of smart devices requires a reliable Internet of Everything system. Huawei’s Hongmeng was born for this purpose. The scale and personalization of cloud services requires top-level algorithm support. Alibaba’s self-developed cloud technology is also to speed up overtaking.

A trend in these fields in recent years is that the importance of technology has increased significantly, and major players are emphasizing the importance of R&D investment. To a certain extent, from the perspective of the development history of global technology giants such as IBM, Amazon, Apple, Huawei, and Ali, high R&D investment and continuous investment are two necessary conditions for growing stronger.

Lenovo’s R&D ratio has not been high. According to the prospectus, the proportion of R&D investment in the last three fiscal years was 2.98%, 3.27%, and 2.92%, respectively.

Let’s take a look at the R&D ratio of other companies of similar scale. In the latest fiscal year, Ali’s R&D investment accounted for about 8%, while Huawei’s was close to 16%, and their revenue scale was larger than Lenovo’s.

There are reasons why Lenovo, a technology company of smart devices, has such a low R&D investment in the past, but a more critical reason is probably the limitations of Lenovo’s business model itself. For example, in PC products, core technology products such as chips, storage, screens, and systems already have clear industry barriers, and it is impossible for Lenovo to rely on research and development to achieve breakthroughs in a short period of time.

Although chips and systems may be a bargaining chip in the future, it is unrealistic for Lenovo to do this with a big R&D banner. It can be said that Lenovo’s business model determines that it does not have many technologies and products that can continue to develop intensively.

However, this flaw will always prevent Lenovo from becoming a high-purity technology company, which will be recognized by the industry and public opinion. In the long run, too low R&D investment is likely to bury some unknown technical hidden dangers for Lenovo’s intelligent transformation.

Lenovo needs to use good addition

From a domestic company that makes PCs to a global technology company, Lenovo has basically been doing additions in the past two decades. The addition of capital in the PC business has indeed consolidated Lenovo’s global position in the PC field, but other businesses, such as the typical smartphone business, have not been revitalized.

There is nothing wrong with adding, especially for giants. Diversification strategy is often the most direct and effective way to consolidate advantages and raise the upper limit of realization. Lenovo’s intelligent transformation today is also doing additions. The addition is the interconnectivity between business and products, as well as the comprehensive capabilities of service industries and industries. Such additions can consolidate the business moat and bring more income possible.

However, the most critical addition should be technology research and development. Intelligence, digitization, cloud and AI all require deep technology accumulation to be at the bottom. Because whether it is the Internet of Things, cloud computing or artificial intelligence, the future game must rely more on the collaborative operation of algorithms and computing power.

This year, Lenovo CEO Yang Yuanqing said that it plans to double its R&D investment in the next three years. Such a determination seems to be too late. Looking at Lenovo’s R&D investment in the past three years, it has increased by about 15%. Therefore, whether Lenovo can really double its R&D investment in the next three years is still doubtful.

But this is also one of the things that Lenovo has the most certainty and certainty about. After all, the addition of research and development is relatively easy to do, and many times it is not right or wrong. For Lenovo, transformation is actually a race against itself. As long as it makes good use of additions in research and development, it will be possible to create a peak in the future intelligent world.