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Presentation DCG TRANSFORMED March 18, 2019 Kirk Skaugen EVP & President, Data Center Group 2019 Lenovo. All rights reserved. Agenda Data Center Market Landscape DCG Vision and Transformation Our Growth Strategy 2019 Lenovo. All rights reserved. Compute Power Over 30 Years 2019 Lenovo. All rights reserved. 4 Consistent Data Center Themes Data Center M&A Activity 2017 2018 2019 1.AI / ML 1.AI / ML 1.AI / ML 2.IOT 2.IOT 2.Cloud 3.Big Data 3.Cloud 3.IOT 4.Cloud 4.Big Data 4.Converged IT 5.Converged IT 5.Converged IT 5.Big Data Source: 451 Research, 2019 2019 Lenovo. All rights reserved. 3 2017 Lenovo 2019Internal. Lenovo All rights Internal. All rights reserved. reserved. PROPRIETARY HW GIVES WAY TO STANDARD HIGH VOLUME Conceptual view >80% Share 1980 1990 2000 2010 Today 2020 ~2025 Price performance* >100,000x since 1980 2019 Lenovo Internal. All rights reserved. 2017 Lenovo. All rights reserved. *Calculations per second per $1K Evolving Landscape Smart IoT Smart Infrastructure Distributed Core IT Edge IT Public Cloud Private Cloud 2019 Lenovo. All rights reserved. 7 DCG Vision: Be the most trusted data center partner – empowering customers’ Intelligent Transformation and solving humanity’s greatest challenges. 2019 Lenovo. All rights reserved. New Culture New Product Branding New Dedicated Sales & Marketing New Dedicated Supply Chain & Quality New Customer-Centric Segments New Global Channel Programs New Systems Integrator Relationships New Leadership Team 2019 Lenovo. All rights reserved. Next Generation IT for software-defined infrastructure Server, Storage, & Networking Solutions for the future-defined data center 2019 Lenovo. All rights reserved. Lenovo DCG Portfolio Software-Defined Infrastructure Engineered Solutions & Software AI Big Data/Analytics Blockchain Cloud Database DevOps HPC Hyperscale IoT/Edge NFV Virtualization Storage HPC/AI Servers Hyperscale Networking IoT / Edge Services: Solution Design, Implementation, Support, TruScale 2019 LenovoLenovo. Internal. All rights All reserved. rights reserved. 11 Industry Leading Performance for x86 Servers ~2X industry workload world records vs. the nearest competitor* 127 88 66 42 24 22 13 14 15 16 9 3 8 4 OCT 2014 MAY 2015 NOV 2016 MAR 2017 JUL 2017 NOV 2017 FEB 2019 Lenovo Lead Competitor 2019 Lenovo. All rights reserved. #1 in X86 Server Reliability – 6 Years Running >750 CXO / IT SURVEYED IN >20 COUNTRIES 16% 16% Lenovo servers achieved the highest levels of “five nines” or 99.999% reliability among all 14% mainstream server hardware platforms 13% Unplanned downtime 10% >4 Hours 7% 1% 3% 3% 2% 2% Lenovo System X Cisco UCS Fujitsu Primergy Dell PowerEdge HPE Proliant Oracle x86 Source ITIC 2016/2017 & ITIC 2017/2018 2019 Lenovo. All rights reserved. 2019 Lenovo.2019 Lenovo All rights Internal. reserved. All rights reserved. 14 PHONE SUPPORT PHONE SUPPORT INITIAL HARDWARE AVAILABILITY ON-SITE TECHNICAL TECHNICAL EXPERTISE QUALITY EXPERTISE MANAGEMENT TOTAL COST PERFORMANCE OF OWNERSHIP CAPABILITIES ONGOING HARDWARE ONLINE TECHNICAL RELIABILITY SUPPORT POST-PURCHASE VIRTUALIZATION, CUSTOMER CARE EFFICIENCY, SCALABILITY ON-SITE RESPONSE TIME ONGOING SERVICES AND MAINTENANCE SOCIAL MEDIA SUPPORT ONLINE PRODUCT 18 OF 22 ATTRIBUTES IN N. AMERICA INFORMATION DELIVERY TIME & 22 OF 22 ATTRIBUTES IN EMEA & APAC PRODUCT AVAILABILITY SELF-SUPPORT / AUTOMATED SUPPORT ONE-TIME SERVICES PURCHASE PRICE / SALES REPLACEMENT PARTS AND SETUP ACQUISITION COST RESPONSIVENESS AVAILABILITY LENOVO DCG RETAINS #1 POSITION IN CUSTOMER SATISFACTION FOR THE 9TH CONSECUTIVE TBR STUDY SINCE JANUARY 2015 2019 Lenovo. All rights reserved. Source: TBR: Corporate IT Buying Behavior and Customer Satisfaction Study / 2H 2018 2019 Lenovo. All rights reserved. DCG Business Turnaround 31% 58% Revenue ($M) 68% 44% PTI ($M) 17% 16/17 16/17 16/17 16/17 17/18 17/18 17/18 17/18 18/19 18/19 18/19 -14% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 -10% -10% 16/17 16/17 16/17 16/17 17/18 17/18 17/18 17/18 18/19 18/19 18/19 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Server revenue: Premium to -22.5 -25.3 -35.3 -11.7 9.3 42.6 27.4 15.1 Market (pts)* (Fiscal quarters) 2019 Lenovo.2019 Lenovo. All rights All reserved.rights reserved. *Source: IDC Server Tracker 4Q18 17 x86 server AUR* trends Market Lenovo $8,000 $7,500 $7,000 (Fiscal quarters) $6,500 $6,000 $5,500 $5,000 $4,500 $4,000 $3,500 (Fiscal quarters) 2019 Lenovo.2019 Lenovo. All rights All reserved.rights reserved. *Source: IDC Server Tracker 4Q18 18 Smart Infrastructure Market Outlook – by Geo $151B $121B 16% $113B China 5% Asia Pacific 4% Europe, Middle East, Africa 7% Latin America North America 6% 2018 2019 2022 Infrastructure Spending (TAM)* ’18 - ’22 CAGR 8% 2019 Lenovo.2019 Lenovo. All rights All reserved.rights reserved. Source: Goldman Sachs, IDC, Gartner, Lenovo Analysis | *Infrastructure includes all x86 server, storage, and L2/3 DC Networking DCG Revenue Mix by Geo* 3% 26% 31% PRC AP EMEA NA LA 14% 27% 2019 Lenovo. All rights reserved. 2019 Lenovo. All rights reserved. *FY18/19 Q1-Q3 20 Smart Infrastructure Market Outlook – by Segment $151B 11% $121B $113B 33% HPC/AI 12% + SERVICES (2022) OEM/IoT $350B** Telco 9% SW Defined/Hybrid Cloud -12% (2022) Traditional IT + SOFTWARE (DCI Server, Storage, Networking) $100B*** 13% Hyperscale 2018 2019 2022 Infrastructure Spending (TAM)* ’18 - ’22 Source: Goldman Sachs, IDC, Gartner, Lenovo Analysis CAGR *Infrastructure includes all x86 server, storage, and L2/3 DC Networking **Services includes Colocation, DC outsourcing, Systems Support, infr. 2019 Lenovo. All rights reserved. 2019 Lenovo. All rights reserved. And IaaS consulting, infr. implementation 8% ***SW includes O/S, VDI, Storage Mgmt, DataBase Mgmt,, #1 Provider Of Supercomputers In The World 140 OF THE TOP 500 (28%) +42 +56 GAP TO #1 -41 -35 -147 -182 NOV 2014 NOV 2015 NOV 2016 NOV 2017 JUN 2018 NOV 2018 2019 Lenovo.2019 Lenovo. All rights All reserved.rights reserved. 22 Lenovo Lenovo: the recognized leader in liquid cooling technology Holistic approach to liquid cooling Energy usage optimization Maximizing performance 2019 Lenovo. All rights reserved. 23 STUTTGART BEIJING MORRISVILLE TAIPEI 2019 Lenovo. All rights reserved. Datacenters are the most important computers in the world today, and in the future – as the workloads continue to change triggered by artificial intelligence, machine learning, data analytics and data sciences – future datacenters of all kinds will be built like high performance computers. – Jensen Huang, Founder, President & CEO, Nvidia 2019 Lenovo.2019 Lenovo All rights Internal. reserved. All rights reserved. 25 TWO GLOBAL POWERHOUSES JOIN FORCES 2019 Lenovo. All rights reserved. 10 NEW STORAGE PLATFORMS ThinkSystem DM Series ThinkSystem DE Series c Global Support with Lenovo End-to-End Services 2019 Lenovo. All rights reserved. 2019 Lenovo. All rights reserved. Lenovo is a proven leader, and their ODM+ capabilities are truly unique in the industry. We chose to partner with them to deliver our ARM- based server platform in order to address the unique design, cost and performance requirements our cloud customers need. – Renee James, CEO and Chairman, Ampere 2019 Lenovo.2019 Lenovo All rights Internal. reserved. All rights reserved. 29 Software Defined Infrastructure SDI YtY Growth vs. Market* >2X for 7 Consecutive Quarters Cloud Composable Composable integrated integrated FY17/18 Q1 FY17/18 Q2 FY17/18 Q3 FY17/18 Q4 FY18/19 Q1 FY18/19 Q2 FY18/19 Q3 - Solutions Market Lenovo Pre $20B 2022 Opportunity Size Industry CAGR (’18-’22) Reference 19% Architectures 2019 Lenovo. All rights reserved. *Source: IDC, Lenovo 26 Internet of Things ThinkSystem SE530 – First of Many Differentiated Edge Server Offerings VESA mount DIN and Wall mount Side by side in rack 2019 Lenovo.2019 Lenovo All rights Internal. reserved. All rights reserved. 27 CITY OF BOGOTÁ Pivot3 and Lenovo provide modern, centralized Safe City infrastructure “With this new scalable edge computing solution, the city’s security team can view any camera, regardless of brand across the city from a single location, which will greatly simplify operations.” —Rafael Padilla, The City of Bogotá selected the Pivot3-Lenovo Safe City solution to simplify the Systems Integrator, City management of 5,000 surveillance cameras across 18 boroughs, increasing its of Bogotá Safe City situational awareness and the ability to monitor and respond to incidents. Project 2019 Lenovo.2019 Lenovo All rights Internal. reserved. All rights reserved. 32 DELHAIZE “The Scale Computing HC3 software, in combination with Lenovo servers and switches, delivered the stability, support and simplicity we needed. The solution outclassed competition on total cost of ownership and simplicity.” —Rolf Vanden Eynde Head of Infrastructure HC3 Edge solution on Lenovo replaced thousands of traditional server deployments Innovation Planning Delhaize (Part of the Ahold Delhaize Group) 2019 Lenovo.2019 Lenovo All rights Internal. reserved. All rights reserved. 33 Telecom Between 2017-2020 • 75% CSPs will pursue NFV • $120B Cumulative Opportunity • 20% segment CAGR DCG is Investing •Custom, telco-hardened hardware platforms •Multi-Access Edge computing solutions •NFV IP and solutions •Growing partner ecosystem •Multiple active engagements 2019 Lenovo. All rights reserved. Source: IDC, Gartner, Lenovo Add China Mobile logo and MWC images 2019 Lenovo.2019 Lenovo. All rights All reserved.rights reserved. Source: IDC, Gartner, Lenovo 28 Lenovo TruScale Infrastructure Services Minimal Upfront Costs Fixed monthly cost On-Prem Security & Control Control the environment Reduced Risk No commitment - Fast time to value ORGANIZATION’S PREFERENCE FOR FUNDING IT INFRASTRUCTURE SYSTEMS AND/OR SOFTWARE PREFERENCE FOR CAPITAL Flexibility & Scalability 39% Pay for use - Easy to scale EXPENDITURES (CAPEX) EQUAL PREFERENCE FOR 31% Full Maintenance, Support OPEX AND CAPEX & Management PREFERENCE FOR OPERATING 30% EXPENDITURES (OPEX) 2019 Lenovo.2019 Lenovo All rights Internal. reserved. All rights reserved. 36 Summary • DCG has transformed • Strong leadership team • Sustained track record of exceeding market growth • Innovation engine alive and well • Investing for the future 2019 Lenovo.
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