The Transcendence of Lenovo

Absrtact: [Lenovo in the asset utilization efficiency is superior, in the debt policy is far more radical than the apple, should be advantageous to raise its net asset return rate. In this context, the net profit margin of sales is much lower than that of Apple, which not only offsets the high efficiency of asset use and the more aggressive debt

[Lenovo is better at asset-use efficiency and more aggressive than Apple in its debt policy, so it should help raise its net asset return rate. In this context, the net profit margin of sales is much lower than that of Apple, which not only offsets the positive effect of higher asset utilization and more aggressive leverage on net asset returns, but also leads to Lenovo's return on net worth far inferior to Apple's.

In April this year, Lenovo CEO Yang proposed: "Challenging smartphones and tablets", the world's leading smartphone and tablet leader Apple and Samsung. Here, we might as well pass several articles, from the financial point of view, a more systematic analysis of Lenovo is now in what position, Lenovo and Samsung, Apple in the product structure, business model, competitive strategy and many other aspects of the differences, and then study Lenovo's possible competitive strategies or challenges Samsung, apple possible path choice.

First of all, we might as well take Apple as a frame of reference to better understand Lenovo's current financial performance in its comparative analysis with Apple. The chart reports the return on net assets of Lenovo Group and Apple in the fiscal year 2009 to 2012 and its DuPont decomposition. It is not difficult to note from the table the following facts:

First, in the last four financial years, Lenovo's net assets rate of return was 8.06%, 14.89%, 20.13% and 23.68%, well below Apple's net asset return of four, 26.03%, 29.32% and 33.83% in the last 35.3% financial years. As we have repeatedly pointed out before, the rate of return on net assets is a measure of the ability of equity capital to make money, to a large extent determines the market price of equity capital, and therefore become the most important and most comprehensive financial indicators. These results show that, in a comprehensive view, Lenovo's financial performance in the last four financial years, and Apple have a big gap.

Second, Lenovo Group's total assets turnover in the last four financial years were 1.8541/year, 2.017/year, 1.8646/year and 2.0065/year, while Apple's total asset turnover in the last four financial years was 0.9032/year, 0.8675/year, respectively. 0.9302 Times/year and 0.8889 times/year. In terms of the efficiency of asset use, Lenovo has thumped Apple.

Third, from the financial leverage of two companies, Lenovo's financial leverage in the last four financial years was 5.5771 times times, 5.8352 times times, 6.7171 times times and 6.3308 times times respectively, while Apple's financial leverage was 1.5013 times times, 1.5732 times times, 1.5189 times times and 1.4894 times times respectively. That suggests Lenovo's debt-financing policy is far more radical than Apple's.

Finally, Lenovo's net sales margin for the last four financial years were 0.78%, 1.27%, 1.61% and 1.86%, while Apple's net profit margin was 19.19%, 21.48%, 23.95% and 26.67%, respectively. Every 1 yuan of sales earned a net profit, Lenovo is far inferior to Apple!

In short, Lenovo's asset use efficiency is better than Apple's, and its debt policy is far more aggressive than Apple's, and should help boost its return on net assets. In this context, the net profit margin of sales is much lower than that of Apple, which not only offsets the positive effect of higher asset utilization and more aggressive leverage on net asset returns, but also leads to Lenovo's return on net worth far inferior to that of Apple.

What is the cause of this phenomenon?

We might as well review the gross profit margins of Lenovo in the last four financial years, 10.78%, 10.95%, 11.65% and 12.03%, which are well below the four, 40.14%, 39.38% and 40.48% of Apple's last 43.87% financial years.

Why is Lenovo's gross profit margin far below Apple's? What is the point of the Lenovo Group's challenge plan? Reader friends may as well as the author, in Taobao search Apple and Lenovo configuration of the same or similar three mainstream products: notebook, mobile phone and tablet computer quotes:

Apple's most expensive notebook Pro me665ch/a licensed Taobao 18500 Yuan, and Lenovo's most expensive notebook computer yoga13-ise-i7 Taobao quotes for 9799 Yuan, for Apple's 52.97%.

Apple's most expensive mobile phone 5 Taobao quotes about 5300 yuan, Lenovo's most expensive mobile phone K900 Taobao quotes about 2860 yuan, for Apple 53.96%.

Apple's most expensive tablet computer iPad4 128G Taobao quotes 6288 Yuan, and Lenovo's most expensive Android tablet S6000 Taobao price for 2222 Yuan, for Apple's 35.34%.

Readers, I believe, understand why Apple's gross profit margins are much higher than Lenovo's. Because Apple's product pricing ability is much higher than Lenovo! Why Apple's product pricing ability is much higher than Lenovo? Because of Apple's excellent research and development capabilities and its ability to develop its market, its products are always ahead of its major rivals, making it difficult for rival products to replace Apple in every market segment, thus ensuring Apple's pricing power.

Does this mean that Lenovo's attempt to surpass Samsung and Apple, from the perspective of creating value for shareholders, should not be limited to mere scale? But should from the quality, the competition strategy and the business model and so on to surpass? In the next few articles, we will discuss this further.