Chinese computer giant Lenovo Group Ltd (聯想) announced yesterday it would cut about 2,500 jobs, roughly 11 percent of its worldwide work force, after suffering losses amid the global economic crisis.
The company said in a statement that the “resource redeployment plan” would help save US$300 million in the fiscal year ending March 31, 2010.
“The company expects to reduce the number of its employees worldwide by 2,500 during the first quarter of 2009, approximately 11 percent of its total work force,” it said, adding that the cuts would include management and executive positions.
“Although the integration of the IBM PC business for the past three years was a success, our last quarter’s performance did not meet our expectations,” Lenovo chairman Yang Yuanqing (楊元慶) said in the statement.
“We are taking these actions now to ensure that in the uncertain economy, our business operates as efficiently and effectively as possible, and continues to grow in the future,” he said.
Lenovo, the fourth-biggest personal computer maker in the world, came to worldwide prominence when it bought IBM’s personal computer unit in 2005. It had seen double-digit growth in profits until the third quarter of last year.
The company said in a separate statement sent to the Hong Kong stock exchange yesterday that preliminary estimates showed it would make a loss in the last three months of 2008.
It said it believed the potential loss is a result of slowing demand for personal computer and related products amid unprecedented global economic challenges. Although Lenovo said it had seen reduced demand around the world it specifically identified problems in China.
“The slowing down in the Chinese economy ... has also affected what has historically been a major market for the group,” it said.
The company said it would also merge its operations in China, the Asia Pacific and Russia to increase efficiency. The new unit will be headed by Chen Shaopeng (陳紹鵬), a senior vice president at Lenovo and president of the firm’s Greater China division. It also announced that Scott DiValerio, who headed the sales organization for the Americas, would be leaving and replaced by Rory Read, senior vice president of operations, as part of its streamlining effort.
Executive compensation, including merit pay and long-term incentives, will be cut by between 30 percent and 50 percent, the group said.
The company’s shares plunged 20 percent to HK$2.07 (US$0.27) at 3:37 GMT yesterday, after trading in its stock was suspended on Wednesday pending the release of the profit warning.
Ample Finance Group’s Alex Wong forecast a bleak outlook for Lenovo and predicted the company would underperform this year.
“This is one stock I won’t buy,” he told Dow Jones Newswires.