Lenovo cuts 2500 jobs on PC pinch

In addition to the job cuts, equaling approximately 11% of the OEM's worldwide employee base, Lenovo plans to reduce executive compensation by 30% to 50%, including merit pay and long-term incentives, as well as any performance payments for the coming year.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 1/8/2009

Lenovo has announced plans to lay off 2500 employees as it seeks to redeploy its resources in the challenging PC market and continuing global economic downturn.

The workforce reduction includes management and executive positions, as well as support and staff functions, such as finance, human resources, and marketing.

In addition to the job cuts, equaling approximately 11% of the OEM's worldwide employee base, Lenovo plans to reduce executive compensation by 30% to 50%, including merit pay and long-term incentives, as well as any performance payments for the coming year. Similar compensation-reduction actions have been taken at several electronics industry companies, including Motorola.

“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,” said Yang Yuanqing, Lenovo’s chairman, in a statement. “We are taking these actions now to ensure that in an uncertain economy, our business operates as efficiently and effectively as possible, and continues to grow in the future.”

As part of the restructuring, Lenovo is consolidating its China and Asia Pacific organizations, which are currently run as separate business units, into a single business unit – Asia Pacific and Russia (APR).

APR will be headed by Chen Shaopeng, currently senior VP and president, of the company's Greater China unit. David Miller, senior VP and president of Lenovo Asia Pacific, will remain with Lenovo for a transition period.

Lenovo also announced today that the company is relocating its call center operations from Toronto to Morrisville, NC, the company’s main site in North America.

Additionally, Scott DiValerio, senior VP and president of Lenovo Americas, who has led the Americas group sales organization for the past year, will be leaving the company. Lenovo's Americas group will now report to Rory Read, senior VP of operations, as part of Lenovo’s streamlining efforts, the China-based company said.

Lenovo's changes come in the same week that Dell announced 1,900 layoffs and Intel further downgraded its Q4 guidance, noting weakness in end demand and inventory reductions by its customers in the global PC supply chain. The changes also come after iSuppli reduced its 2009 PC forecast on the credit crunch, stating that single-digit PC unit shipment growth of only 4.3% is expected this year as IT equipment purchases take a back seat to "real issues," like paying staff.

From the restructuring actions, Lenovo expects to realize savings of approximately $300 million in the 2009/2010 fiscal year, ending March 31, 2010. The company anticipates taking a pre-tax restructuring charge of approximately $150 million, most of which will be taken in its fiscal Q4, ending March 31, 2009. Approximately $24 million of the restructuring charges were booked in Lenovo’s fiscal Q2, ended September 30, 2008. The company also expects to report a loss for its fiscal Q3, ended December 31, 2008.

“The actions we are taking today are not easy, and we will act with compassion and respect for the individuals in our company who are most affected,” said William J Amelio, Lenovo’s president and CEO, in the statement. “As hard as this news is for all of our Lenovo employees, we believe the steps we are taking today are necessary for Lenovo to compete in today’s economy, and in the long run, will help us to continue to deliver exceptionally engineered PCs to our customers worldwide.”