Lenovo to cut 2,500 jobs amid global slowdown

HONG KONG: Chinese computer giant Lenovo announced Thursday it would cut about 2,500 jobs, roughly 11 percent of its worldwide workforce, after suffering losses due to the global economic crisis.

The company said in a statement to the Hong Kong Stock Exchange that the "resource redeployment plan" would help save 300 million US dollars in the financial year ending March 31, 2010.

"This plan, when fully implemented, is likely to have the effect of reducing the number of the group's worldwide employees by approximately 2,500, representing approximately 11 percent of the group's total workforce," it said.

The company said it will also merge its operations in China, Asia Pacific, and Russia to increase efficiencies.
Lenovo, the world's fourth-biggest personal computer maker, said preliminary estimates showed it would make a loss in the final three months of 2008.

"The board believes that such potential loss is incurred mainly due to the unprecedented global economic challenges facing the world resulting in a reducing demand of personal computer and related products," the statement said.

Lenovo had seen reduced demand around the world, the company said, although it also specifically identified problems in China.

"The slowing down in the Chinese economy has also affected what has historically been a major market for the group," it said.

It said that its gross profit had decreased significantly due to its relatively high proportion of sales in the commercial segment, where sales had dried up.

The company's shares price plunged 17.4 percent to 2.13 Hong Kong dollars (0.28 US) early Thursday, after trading in its stock was suspended Wednesday pending release of the profit warning.

Ample Finance Group's Alex Wong forecast a bleak outlook for Lenovo and predicted that the company would underperform in 2009. "This is one stock I won't buy," he said.

Hong Kong-listed Lenovo, which came to worldwide prominence when it bought IBM's personal computer unit in 2005, said in November last year that its net profit for the three months ending September 30 slumped 78 percent from a year earlier to 23.4 million dollars.

The drop in the third quarter followed the company's report of a surge of more than 200 percent in the 2007-8 financial year, citing strong growth in sales across the world. It also reported double-digit growth in sales in all its markets outside the United States in May last year.

Its president and chief executive officer, William Amelio, said in 2008 that Lenovo would continue to target new markets. The company tried in 2007 to buy European personal computer maker Packard Bell, but was thwarted by a stronger bid by Taiwanese rival Acer.