Hong Kong: Lenovo Group, the world’s No. 4 PC seller, announced a broad restructuring on Thursday, including a lay-off of 2,500 workers, as the global downturn pushed it to a loss for the December quarter.
Shares in the company, which were suspended on Wednesday, opened nearly 17% lower in Hong Kong following the announcement.
“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,” chairman Yang Yuanqing said 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.”
Lenovo said the 2,500 employees accounted for about 11% of its total workforce, and the cuts were part an effort to realise annual savings of $300 million for the year ending in March 2010.
It added that it would incur a pre-tax restructuring charge of about $150 million for the financial year 2008/09, which would be largely reflected in the fourth quarter ending in March 2009.
As a result, the company said it would report a loss for its quarter that ended 31 December.
As part of the restructuring, the company said it would consolidate its China and Asia Pacific organisations into a single business unit - Asia Pacific and Russia (APR).
It added it also plans to reduce executive compensation by 30 to 50%, including merit pay and long-term incentives.
The slowdown in the Chinese economy, which has been a major market for the company, also hurt sales, it said in a filing to Hong Kong bourse.
The Chinese computer maker said it is relocating its call center operations from Toronto to Morrisville, North Carolina, the company’s main site in North America, with the aim of better leveraging its investment in real estate and facilities.
As part of the management reshuffle, David Miller, senior vice president and president, Asia Pacific, will remain with Lenovo for a transition period. Scott DiValerio, senior vice president and president, Americas, who has led the Americas Group sales organisation for the past year, will be leaving the company, Lenovo said.
The Americas group will report to Rory Read, senior vice president, operations.
Shares of Lenovo tumbled 70% last year amid concerns about its eroding position in the worldwide market, compounded by effects of the sell-off in global stock markets.
Lenovo saw its share of the global PC market drop to 7.4% in the third quarter of 2008 from 8.0% a year earlier, as it battled aggressive smaller rivals such as Acer and Asustek, both of Taiwan, and Japan’s Toshiba.
All the industry’s major players are also having to cope with increasing softness in the market due to reduced consumer and business spending in the global economic downturn.