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EXCLUSIVE: Lenovo Calls In KPMG After Rebate Payments Go Astray

Giant Chinese PC Company Lenovo who have been handing out massive rebates to retail partners, to grow their consumer business in Australia, has called in KPMG after it was revealed that some retailers and distributors have not been paid their rebates for several months.

The problem that started to unravel several months ago, is believed to have initially impacted JB Hi Fi, Harvey Norman and Ingram Micro.

In a statement to ChannelNews Lenovo Australia CEO Matt Codrington said “In the past year Lenovo ANZ continued to invest in new systems and processes to drive efficiency and improvements for our partner and customer experience. However, we acknowledge the transition to these new systems and our shared services off-shore processing team has encountered some initial challenges resulting in some delays in processing partner rebate claims”.

ChannelNews understands that one retailer alone was owed over $1.3M dollars.

Codrington added “To help expedite and independently validate remaining claims we’re working with KPMG on some short term assistance and expect to be back to ‘business-as-usual’ later this quarter.

Cameron Trainor the CEO of JB Hi Fi said that matters were now “all good” with Lenovo.

According to an Ingram Micro source the issues has been “ongoing for months” they also said that “a lot” of their customers were complaining about Lenovo selling direct while at the same time they are “trying to grow sales via the retail channel.”

The Ingram source said that recent splash advertising that drove consumer to Lenovo’s direct sell web site had upset “many customers”.

Several retailers as well as Ingram Micro have been impacted by a lack of cashflow from Lenovo.

Brendan Lau head of consumer at Lenovo and the man who is believed to have headed up the negotiations with partners was not available to comment for this story.

On Friday Lenovo Group posted a surprise quarterly loss of $72M after the Chinese PC maker slipped into #2 position in the PC market after a 6% decline in PC sales.

Income was tipped to be $32.9 million, the loss drove its stock down as much as 4.2 percent in Hong Kong to its lowest intraday level in more than a year.

Lenovo has been losing PC share to HP and Dell, next month the Company is set to announce several new consumer PC’s at the 2017 IFA show in Berlin.

Also under pressure is the Company’s Motorola smartphone business.

“Lenovo is facing a great deal of performance pressure in its first two quarters of new fiscal year,” said Antonio Wang, associate vice-president for IDC China. It “is facing a transformation period as the executive team tries to reorganize business in major regions and reconstruct its business model.”

Revenue for the period slipped to $10 billion, a whisker above predictions for $9.9 billion.

Its dismal quarter contrasts with HP, which has reported revenue more than projections for four straight quarters and this year overtook Lenovo in market share despite lagging its rival in China.

Chairman Yang Yuanqing is exploring ways to rejuvenate Lenovo’s core PC business, including a potential tie-up with Fujitsu Ltd. that he said last month is still under negotiation. The company has reenlisted former mobile-unit head Liu Jun to oversee its Chinese business and has joined with e-commerce site JD.com in a bid to push its annual online revenue to 80 billion yuan ($12 billion) within three years.

Bloomberg said that while the 2005 acquisition of International Business Machines Corp.’s PC division paid off by lifting Lenovo closer to the top of the market, the 2014 purchases of IBM’s low-end server unit and Motorola Mobility haven’t gone as smoothly. The division reported a 6 percent decline in PC shipments to 12.4 million units. Revenue rose slightly to $7 billion.

Lenovo is betting on the Motorola brand and innovative modular designs to revive its mobile unit, and remains outside the top five in its home market, according to IDC. Sales in the division rose 2.4 percent to $1.75 billion. Its data centre business, which saw revenue shrink 11 percent in the quarter, is on track to become profitable in about two years, Yang told analysts on a conference call.

It’s also sinking money into an effort to catch the next wave of computing gadgets. On Friday, it said it’ll invest $1.2 billion on research into artificial intelligence, the Internet of Things, virtual reality and other emergent fields over the next four years.

“The material cost increase significantly impacted our business, actually it impacted all three business,” Yang said in an interview, referring to the PC, mobile and data centre units. “We definitely have to consume the cost increase if we want to keep the decent profitability. It must be reflected into our selling price.”

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