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Lenovo to Lay Off 11 Percent of Workforce; Expects Quarterly Loss

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January 08, 2009

Lenovo to Lay Off 11 Percent of Workforce; Expects Quarterly Loss

By Michael Dinan, TMCnet Editor

To weather the deepening global recession, the world’s fourth-largest PC maker announced that it’s laying off about 11 percent of its workforce, or 2,500 employees.

Officials at Lenovo, a Chinese company with U.S. headquarters in Morrisville, North Carolina, say they’re also reducing executive pay by 30 to 50 percent, including merit pay, long-term incentives and performance bonuses.
According to Yang Yuanqing, Lenovo’s chairman of the board, though the integration of the IBM (News - Alert) PC business for the past three years was a success, the company’s last quarter’s performance did not meet expectations. Lenovo hasn’t yet released its quarterly earnings report for the three-month period ending Dec. 31, but said today that it’s expecting a loss.
“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,” said Yuanqing, pictured right.
Lenovo is combinging its China and Asia Pacific organizations, which are currently run as separate business units, into a single business unit. Company officials say the new organization will help reduce operating expenses and eliminate redundant work.

The company also said that it’s relocating its call center operations from Toronto to Morrisville – a move designed to leverage real estate and facilities holdings.
As TMCnet reported, Lenovo’s discouraging report comes as the world’s largest maker of computer mouse devices announced that it’s laying off 15 percent of its workers and lowering revenue targets.
Officials at Logitech International say the deepening global recession is fueling a withdrawal of fiscal year 2009 growth targets for sales and operating income.
According to Gerald P. Quindlen, Logitech’s (News - Alert) president and chief executive officer, the retail environment deteriorated quickly last month.
“We experienced varying degrees of weakness across all geographies and channels as our customers reduced inventory levels in the face of weaker consumer demand,” Quindlen said. “Moreover, we expect the economic environment to worsen in the coming months and we are therefore taking significant actions to align our cost structure with what is likely to be an extended downturn.”
IT and tech-related companies are doing different things to weather the slower economy and try to navigate the recession.
As TMCnet reported, the United States’ largest electronics retailer says that it’s selling used versions of Apple (News - Alert) Inc.’s iPhone 3G.
Best Buy Co. told Reuters (News - Alert) that it would sell devices priced about $50 less than new iPhones.
Since the recession has taken hold in earnest, advice to tech companies about weathering this economy has abounded.
Today, as TMCnet reported, an international technology consulting firm put out a report that describes the recession of 1990-91 and describes seven ways that CE companies can navigate the economy.
Officials at Accenture say that when the last recession hit, Accenture’s (News - Alert) report says, companies that proactively invested in core capabilities, assets and innovation, while reducing expenses in non-core areas, actually emerged in a much stronger position than those that simply reduced costs and waited for better times.
“Accenture’s ongoing High-Performance Business research found that a distinctive trait of high-performance business is the ability to proactively use a downturn,” the company said.
Seven strategies to do so include: Strategically Cutting Costs; Sharpening Customer Focus; Driving Operational Excellence Globally; Acquiring Key Capabilities and Assets; Investing in Innovation; Maintaining Pricing Discipline; and Focusing on Specific Market Segments.
Meanwhile, officials at Lenovo say their restructuring will bring in savings of about $300 million for the fiscal year ending March 31, 2010.
According to William J. Amelio, Lenovo’s president and chief executive officer, the actions taken today are not easy, and Lenovo will act with compassion and respect for the individuals in our company who are most affected.
“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,” Amelio said.

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Michael Dinan is a contributing editor for TMCnet, covering news in the IP communications, call center and customer relationship management industries. To read more of Michael's articles, please visit his columnist page.

Edited by Michael Dinan

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