Lenovo Is Laying Off 3200 Staff After A Poor Quarter Of Business

The world’s largest PC maker by shipments said Thursday it will cut 10% of its nonmanufacturing positions, or 3,200 people, as part of a $650 million cost-cutting program in the second half of the fiscal year.

In the wake of lackluster earnings, Lenovo said it is working towards pumping out products faster from its newly acquired Motorola Mobility division.

In addition to the layoffs, Lenovo will write off $300 million in unsold smartphones, and spend $600 million to restructure its smartphone businesses so that Motorola and Lenovo are more strategically aligned.

Motorola’s contribution to Lenovo’s smartphone shipments stood at 5.9 million units, a 31 percent decline year-over-year. Revenue increased by only 3 per cent from a year ago, to reach $US10.7 billion.

The company reported a net profit of US$105 million for its fiscal first quarter, down from US$214 million a year earlier. The ThinkServer brand that targets small and medium sized enterprises increased over 40 percent.

He says the company will also focus and reposition its enterprise business “to attack the most relevant and attractive market segments, while increasing overall speed and cost-competitiveness” and accelerate its drive for 30% share in the PC market by taking advantage of consolidation and becoming more efficient.

Analysts have been bearish about the near-term performance outlook for Lenovo amid the challenging market conditions.

Lenovo shares traded in Hong Kong were down nearly seven percent in morning trade at HK$7.88 (US$1.02).

“In the smartphone business, our strategic shift from China to the rest of world has paid off. And our combined enterprise business achieved operational PTI for the third consecutive quarter”, said Yuanqing Yang, Chairman and CEO of Lenovo.

For tablets, the company shipped 2.5 million units, a jump of 5.6 percent. With 5.8% of the tablet market, Lenovo is number three globally and managed to steal away some market share from the two manufacturers ahead of it.

But even with the cost cutting, Lenovo is confident the restructuring will lead to robust smartphone growth over time. In Enterprise, the EMEA team is attacking more opportunities with an integrated team. This represented 30 percent of Lenovo’s total worldwide sales. And now, the Chinese device maker plans to exploit Motorola’s expertise related to the production of smartphones.