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Lenovo cuts jobs amid falling profit

LENOVO Group Ltd, China's biggest personal-computer maker, said yesterday that it will cut about 11 percent of its workforce, as the global economic downturn caused the company to forecast its first loss in three years.

The news prompted the firm's Hong Kong shares to fall the most since 1998.

Lenovo will eliminate about 2,500 jobs in the first three months this year, leading to savings of some US$300 million in the year ending March 2010, the company said yesterday. It plans to book a charge of about US$150 million this fiscal year.

Lenovo, which is based in Raleigh, North Carolina, said the majority of layoffs in the first quarter would occur outside China, without disclosing further details.

The job cuts exceed the more than 2,000 positions Lenovo eliminated in 2006 and 2007 after it acquired International Business Machines Corp's PC unit.

Lenovo, now the world's fourth-biggest PC producer, also said it plans to lay off some senior executives and reduce executives' pay this year.

Executives lose, too

Executive compensation will be decreased by 30 percent to 50 percent, including bonuses and other incentive payments, the company said.

"The actions we are taking today are not easy," Bill Amelio, Lenovo's chief executive, said in a statement. "We believe the steps we are taking today are necessary for Lenovo to compete in today's economy."

The company said it probably had a "material loss" for the quarter ended December 31 because of falling PC demand.

Lenovo's shares plunged 26 percent to HK$1.91 (25 US cents) yesterday, following a suspended trading day on Wednesday.

The global financial crisis has buffeted thousands of small and medium Chinese enterprises. Many of them have shut down, especially in south China.

Lenovo's loss forecast and layoffs indicate that the crisis has spread to China's manufacturing giants, industry analysts said.

The computer maker, which hasn't released its fourth-quarter result, posted a 78-percent drop in July-September net profit to US$23.44 million.

Bigger rival Dell announced plans yesterday to cut around 1,900 of the 3,000 jobs at its manufacturing plant in Ireland and move many of them to Poland as part of a US$3-billion cost-reduction plan.

Data storage company EMC Corp said on Wednesday that it will lay off 2,400 people to bring down costs.

"It's the toughest time for Lenovo after the acquisition, and it's necessary for it to do something," said Qu Xiaodong, an analyst at Beijing-based consulting firm CCW Research.

Lenovo's global market share was 7.3 percent at the end of last year, compared with 7.8 percent a year ago, according to Gartner Inc, a US-based IT consulting firm.

Meanwhile, Lenovo's China and Asia Pacific organizations, which are run as separate businesses, will be consolidated and led by Chen Shaopeng, who runs Lenovo China operations.

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