Lenovo suddenly withdrew from the Science and Technology Innovation Board, with R&D investment less than 3% and 30 executives' salaries of nearly 1 billion becoming the biggest complaint

On September 30, the day before the National Day holiday, the official website of the Shanghai Stock Exchange showed that Lenovo Group's application for the initial public offering of depositary receipts and listing on the Science and Technology Innovation Board had been accepted.

On October 8, the first day after the long holiday, Lenovo Group suddenly announced that it had withdrawn its listing application documents. In total, the listing journey lasted only one working day, and such "efficiency" also shocked the outside world.

However, since the day Lenovo's application for listing on the Science and Technology Innovation Board was accepted, outside doubts about it have never stopped.

The biggest question is whether Lenovo is eligible to be listed on the Science and Technology Innovation Board.

If we look at it purely from the perspective of profitability and R&D investment, there seems to be no problem: in the past three fiscal years, Lenovo's net profit has achieved an average annual compound growth rate of 43%, and its average annual R&D investment during this period has exceeded 10 billion yuan, which is higher than any other listed and applying company on the Science and Technology Innovation Board.

But this number does not stand up to scrutiny. The Science and Technology Innovation Board requires that companies must have R&D investment of more than 5% of their revenue in the past three years, or have accumulated R&D investment of more than 60 million yuan in the past three years, in order to be listed on the Science and Technology Innovation Board.

Lenovo has passed the test in terms of R&D investment, but its R&D investment in the past three fiscal years accounted for 2.48%, 2.63% and 2.39% respectively, which is still a certain distance from the requirements of the Science and Technology Innovation Board. In the first three quarters of 2020, the average R&D investment of 200 Science and Technology Innovation Board companies accounted for 15.63%.

In September this year, Lenovo held the 2021 Lenovo Innovation Technology Conference. At the conference, Chairman and CEO Yang Yuanqing said that he plans to double his R&D investment within three years. At the conference, Lenovo also launched a new IT service brand - Lenovo TruScale. Lenovo claims that TruScale will integrate the traditional decentralized procurement model of hardware, software, and services, and the segmented implementation model of design, construction, and operation and maintenance into a subscribed one-stop all-inclusive service model.

Lenovo's approach is easily reminiscent of an international technology giant: IBM.

In 2005, after selling its laptop business to Lenovo, IBM transformed into the IT service sector. However, IBM's success is inseparable from its huge investment in research and development. In 2020, IBM's research and development investment accounted for 9% of its total revenue, and it obtained 9,130 ​​patents in the United States, ranking first for 28 consecutive years.

Since Lenovo acquired IBM's laptop business, it has become the leader in the global PC market. According to IDC statistics, Lenovo accounted for 24% of the global PC market in 2020, ranking first in the world. But on the other hand, computers and other smart devices account for nearly 90% of Lenovo's revenue structure, which shows Lenovo's dependence on this type of business.

However, Lenovo has not made many technological breakthroughs. It is neither capable of designing its own chips like Apple, nor able to develop its own exclusive systems like Huawei. Instead, it has always been content with the identity of an "assembler".

Even if Lenovo can really double its R&D investment as Yang Yuanqing mentioned, its R&D investment will only account for 4% to 6% of total revenue, which is still a clear gap compared with companies like Huawei that maintain an R&D investment of more than 15% all year round.

In the past three years, Lenovo Group's gross profit margin has been only 15.67%, which is a sign of a lack of core competitiveness for a technology company. In comparison, the gross profit margin of technology giant Apple in the second fiscal quarter of this year was as high as 42.5%.

The purpose of establishing the Science and Technology Innovation Board is to implement the innovation-driven and science and technology power strategy and promote high-quality development. From this perspective, Lenovo and the Science and Technology Innovation Board do not seem to be very compatible.

In addition, the salaries of Lenovo executives have also been questioned by the outside world. Lenovo's prospectus shows that the company's revenue in the past three years was 342.3 billion yuan, 352.6 billion yuan, and 411.6 billion yuan, respectively, and its net profit in the past three years was 4.4 billion yuan, 5.5 billion yuan, and 8.9 billion yuan, respectively. In other words, Lenovo's profit margin has never exceeded 3%.

But given the low profit margins, the salaries of Lenovo's executives are staggering.

The company's founder Liu Chuanzhi's annual salary exceeded 76 million yuan, and CEO Yang Yuanqing's salary reached 168 million yuan. Several executives also received salaries exceeding 50 million yuan. Lenovo's prospectus shows that the company's 30 directors, executives and core technical personnel received a total salary of 934 million yuan, accounting for about 7.7% of revenue.

If we take Lenovo Group's debt into consideration, the high salaries of executives become even more questionable. As of 2021, Lenovo's debt-to-asset ratio has exceeded 90%, with debts as high as 225.922 billion yuan, and the growth rate has exceeded 10% in the past three years.

According to statistics in 2018, the asset-liability ratio of the computer, communication and other electronic equipment manufacturing industry on the Science and Technology Innovation Board was 55.7%. On the one hand, the debt ratio is high, and on the other hand, the salaries of senior executives are often hundreds of millions. This contrast is really a bit glaring.

Lenovo's prospectus shows that Lenovo plans to raise 10 billion yuan in funds by listing on the Science and Technology Innovation Board, of which 5.5 billion yuan will be used for the research and development of new products and solutions, 1 billion yuan will be used for industrial strategic investment projects, and 3.5 billion yuan will be used to supplement working capital.

Given Lenovo's debt situation, it is still unclear how much this money can do. There are even voices from the outside world that Lenovo wants to use the Science and Technology Innovation Board to "raise money to pay salaries."

20 years ago, Lenovo Group proposed to build "a high-tech Lenovo, a service-oriented Lenovo, and an international Lenovo", but it seems that they have only achieved the last point.

What will happen to the world if humans lose Lenovo? It’s time for Lenovo to answer the question.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.