Lenovo Group to lay off 10% of global non-manufacturing workforce
13 Aug 2015
Lenovo Group Ltd missed quarterly revenue expectations today and said it planned to lay off about 10 per cent of its global non-manufacturing workforce, after reporting a steep sales decline in its mobile division.
According to the world's No 1 PC maker, it planned to cut about 3,200 non-manufacturing positions to save -$650 million in the second half of 2015 and about $1.35 billion on an annual basis.
According to chief executive Yuanqing Yang, Lenovo would also restructure its lagging smartphone business at a one-time cost of $600 million.
He added the company was facing its ''toughest market environment in recent years''.
Lenovo, last year acquired handset brand Motorola at a cost of $2.91 billion from Google Inc as it looked to consolidate its position in smartphones.
Lenovo's mobile division reported a pre-tax loss of $292 million in the three months to end June, while the company shipped 5.9 million units, a 31-per cent decline from a year prior.
The company's quarterly revenue was up 3 per cent overall to $10.7 billion but missed analyst expectations for $11.29 billion, according to analysts polled by Thomson Reuters SmartEstimates.
The Beijing-based company's net profit fell 51 per cent year-on-year to $105 million, which was less than a 59 per cent drop expected by analysts.
Analysts had been downbeat about the near-term outlook for the company.
The global PC market shrank 11.8 per cent in the second quarter, while the Chinese smartphone market had saturated, contracting in the first quarter for the first time in six years, according to market research firm IDC.
''The market has eroded faster than anyone had predicted,'' said Patrick Moorhead, principal analyst of Moor Insights & Strategy, The Wall Street Journal reported. ''All bets are off at this point.''
Yang said in an earnings call today that he would restructure Lenovo's mobile business, which was losing market share.
The company would launch fewer models and concentrate more on the recently acquired Motorola brand. The company would book $900 million in restructuring and smartphone inventory clearing costs in the next quarter.
Lenovo rose to No3 in global smartphone rankings with its purchase of Motorola, but it was down to No 5 in the second quarter with a 4.5-per cent market share, as per Counterpoint Research. It was surpassed by two Chinese peers, Huawei Technologies Co and Xiaomi Corp, in shipments that quarter.
Worldwide shipments of personal computers fell 6.7 per cent in the first quarter compared to a year ago, according to data released by market research firm International Data Corporation. (See: PC shipments drop 6.7% in Q1; Lenovo continues to lead).