Lenovo’s EMEA president has confirmed the company was forced to write down excess PC inventory after the downturn in the industry caught it and other players in the market short.
As revealed months back, Lenovo was the worst offender in a European sector where demand fueled by Microsoft ending support for XP and by wider refresh cycles filled everyone with an overconfidence.
Growth rates normalised toward the end of last year, but PC makers did not seem to factor this into their forecasts, and stock started to build, with some saying Lenovo was the worst offender.
“Clearly there was inventory in the channel”, Eric Cador, who rocked up at Lenovo in April, told us in an exclusive interview, “but with such a drop in sell-out that none of us exactly understand what happened... guess what, you have inventory”.
The market shifted from double digit growth to one of declines, and hasn’t got any better since.
Distributors like to ideally run with four to six weeks of stock, but Cador told us “we were a few weeks too many”.
The dynamic could be seen in Gartner’s Q2 results – Lenovo’s EMEA sales into the channel dropped 13 per cent following a seemingly never-ending run of expansion.
Cador said he decided to bite the bullet and write down some stock, offering “price promotions, no magic”. The extent of the problem “varied country by country”, he added.
We asked about the financial impact of the write down, but Lenovo refused to answer the question.
Tomorrow the company reports results for Q1 for fiscal ’16, and the extent of the move, along with currency fluctuations, should be seen on the P&L accounts.
“Forecasting is not an exact science, it depends on your mindset. If you are ambitious you want to take the risk of being overstocked at some point in time rather than being understocked and losing market share. The goal is to be right”, Cador added.
“With 90 to 120 days planning in advance you take a controlled risk, and it is part of managing the PC business”, he told us. ®