China’s Lenovo to cut over 3,000 jobs as net profit halves

  • Technology
  • Thursday, 13 Aug 2015

Grim outlook: Decreasing global demand for PCs has hit Lenovo hard, despite its efforts to diversify into other sectors, including the smartphone market.

HONG KONG: Chinese computer giant Lenovo said it would cut more than 3,000 jobs as net profit for its first quarter fell by more than 50%. 

The world’s biggest personal computer maker also saw revenues miss analysts’ forecasts in what chairman and CEO Yuanqing Yang described as the “toughest market environment in recent years”. 

Net profit dropped 51% to US$105mil (RM421.18mil) for the first three months to June 30 – which the firm takes as its first quarter – compared to US$214mil (RM858.41mil) for the same period last year. 

Pre-tax profit for the first quarter also plunged by 80%. 

Revenue grew three percent to US$10.7bil (RM43.05bil), but fell short of Bloomberg analysts’ average estimates of US$11.5bil (RM46.27bil). 

In a statement to the Hong Kong stock exchange, Lenovo said it would seek to slash costs by US$1.35bil (RM5.43bil) annually and cut 3,200 staff from its non-manufacturing workforce – around 5% of its worldwide headcount. 

It would also restructure its mobile business. 

“In the face of financial results that did not meet expectations, Lenovo is undertaking broad, decisive actions – including better aligning its businesses and significantly reducing costs,” the firm said in a statement. 

Lenovo shares traded in Hong Kong were down almost seven percent in morning trade at HK$7.88 (RM4.08). 

Lenovo has suffered from a decline in global demand for PCs, which account for around a third of its revenue despite its efforts to diversify into other sectors, including the smartphone market. 

Revenue from its PC business was down 13% year-on-year, while the mobile sector – combining Lenovo and Motorola – was up by 33%. 

“In the smartphone business, our strategic shift from China to the rest of world has paid off,” Yang said. 

But moving towards mobile has presented challenges for the company as demand weakens in China in the face of increased competition from affordable domestic brands. 

Lenovo said its share in the worldwide smartphone market had slipped 0.5% in the first quarter, “affected by softer demand and severe competition in the China smartphone market”. 

It also cited challenges in Brazil and Latin America as slowing momentum for Motorola’s business growth. 

Lenovo bought Motorola from Google for US$2.9bil (RM11.66bil) last October, soon after its purchase of IBM’s low-end server business as part of its strategy of broadening beyond PCs. — AFP

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