Financial Crisis Hits China’s Lenovo As Company Cuts Worldwide Staff

By Editor
January 08, 2009

The global financial crisis has hit Chinese PC maker Lenovo (LNVGY) as it today announced cutting approximately 11% of its total global workforce, and the company expects to report a loss for the fiscal quarter that ended December 31, 2008.

“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 of the board. “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.”

From these restructuring actions, the company expects to realize savings of approximately USD300 million in the 2009/2010 fiscal year that ends March 31, 2010. The company anticipates taking a pre-tax restructuring charge of approximately USD150 million, most of which will be taken in the fourth fiscal quarter ending March 31, 2009. Approximately USD24 million of the restructuring charges were booked in Lenovo’s second fiscal quarter ending September 30, 2008.

The company expects to reduce the number of its employees worldwide by 2,500 during the first quarter of 2009, and this includes management and executive positions. The company is also reducing expenses in support and staff functions, such as finance, human resources, and marketing.

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. The new organization will help the company reduce its operating expense and eliminate duplicative support and staff functions. As reported earlier in the week, APR will be headed by Chen Shaopeng, currently senior vice president, and president for Greater China. David D. Miller, senior vice president and president for Asia Pacific, will remain with Lenovo for a transition period.

Lenovo says as part of these cost-saving actions that it is relocating its call center operations from Toronto to Morrisville, North Carolina, the company’s main site in North America.

Also, in a move that will certainly make its employees look for other jobs, Lenovo plans to reduce executive compensation by 30-50%, including merit pay and long-term incentives, as well as any performance payments for the coming year.

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