Lenovo says it is to restructure its mobile business group (MBG) and cut 3,200 jobs worldwide, after announcing a 51% drop in first quarter net profit (see Finance Results).
Yuanqing Yang, chairman and CEO of Lenovo described Q1 as “perhaps the toughest market environment in recent years”. Despite Lenovo maintaining its number one position in the PC market for the ninth consecutive quarter, Yang said that the company needs to take decisive actions to return to profitable growth, including better aligning its businesses and significantly reducing costs.
Specific actions will include aligning smartphone development, production and manufacturing to better leverage the complementary strengths of Lenovo and Motorola. This will result in a more simple, streamlined product portfolio, with fewer, more clearly differentiated models. MBG will continue to drive the overall mobile business but will in future rely on Motorola to design, develop and manufacture smartphone products.
In Lenovo’s PC business, Yang said the company aims to accelerate the drive for 30% share in PCs by better taking advantage of consolidation, while becoming even more efficient and reducing costs to ensure sustainable, profitable growth.
As a result of these actions, 3,200 jobs will be cut across Lenovo’s global non-manufacturing operations, which equates to approximately 5% of Lenovo’s total workforce. This will also reduce expenses by about $650 million in the second half of this year and about $1.35 billion on an annual basis, and the company will incur restructuring costs of approximately $600 million and additional spending to clear smartphone inventory of approximately $300 million.