Business

Lenovo to Cut 350 Jobs in Triangle

Posted April 19, 2007

— Lenovo, the world’s third ranking PC manufacturer, is laying off some 350 people in the Triangle as part of a corporate round of job cuts.

That total represents more than 20 percent of the 1,600 people who work at Lenovo’s new $70 million headquarters complex.

In all, Lenovo is laying off up to 1,400 people over the next 30 to 60 days, a company spokesman told WRAL Local Tech Wire. The cuts represent about 5 percent of Lenovo’s workforce.

However, out of those positions, approximately half will be transitioned to other countries.

"I think most employees understand that (these) actions reflect the realities of our fiercely competitive industry," spokesman Ray Gorman said. "These are difficult and certainly painful decisions, and we do not take them lightly."

Average salaries for Lenovo employees in the Triangle is approximately $70,000, Gorman said.

The positions are being eliminated and aren't being transferred somewhere else, he stressed.

“Transferred implies someone might be able to apply for a position that is being moved elsewhere. That is not the case,” he said.

Most of the local jobs affected are part of the supply chain operation. Lenovo wants to move some of its supply chain positions closer to customers in other countries, Gorman said.

Some software testing jobs will be cut as well, with those positions moving to China, he added.

“This is a global action across the board by geography and by function,” he said. “The point here to understand is that jobs are going all over the world.”

Mike Walden, an economist with North Carolina State University, said the layoffs hurt but aren't devastating to the Triangle region.

"We never like it when anyone gets laid off. But to put this in context, we've created about 20,000 jobs in this area in the last year," Walden said. "If you're going to be unemployed anywhere in this country, this is a good place to be unemployed in."

Lenovo plans to hire people in other countries to replace nearly half of those personnel it is letting go.

“This is really about jobs moving to emerging markets, such as Brazil, Eastern Europe, India and China,” Gorman said. “A majority of the jobs are not moving to China but to other countries.”

The cutbacks are the latest announced by Lenovo since it acquired IBM’s personal computing division for more than $1 billion in 2005. Through the cuts, more than 600 former IBM employees have been hit.

A year ago in March, Lenovo slashed headcount by 1,000 while deciding to locate its headquarters in Morrisville. Most of IBM’s PC division was based in the Raleigh area before the Lenovo sale. Some 1,800 IBM employees transitioned to Lenovo through the deal.

Lenovo described the latest cuts as a “series of measures designed to enhance business performance and accelerate profitable growth.”

In a statement, Chief Executive Officer William Amelio said Lenovo needed to reduce expenses.

“To win in the PC industry, our path is very clear,” he said. “We must deliver the world’s best-engineered PCs, offer our customers an unrivaled ownership experience, and grow faster and more profitably than the rest of the industry. This means we must make our organization more efficient by reducing expenses.”

Lenovo said the net reduction in jobs will be some 650 over the next year.

The changes are expected to produce some $100 million in savings for the new fiscal year beginning April 1, Lenovo said. The firm added that the “majority” of the cost savings will be “reinvested” in strategic initiatives.

"We are absolutely committed to Raleigh and the Research Triangle community," Gorman said. "The decisions we're making are tough, but they're necessary decisions for us in order for us to thrive and grow. Our intention is to grow jobs around the world, and that certainly includes Raleigh."

Lenovo recently disclosed plans to launch a division focused on consumer sales. It is also working with Microsoft to open a joint research and development center in Beijing.

The cuts were announced just after two data tracking companies reported Lenovo had a strong first quarter in worldwide sales. Gartner said Lenovo increased PC shipments by 16 percent over the same quarter in 2006 to nearly 4 million. IDC reported similar sales figures and credited Lenovo with a 17 percent increase.

However according to Gartner, Acer, a PC manufacturer in Taiwan, passed Lenovo as the No. 3 computer builder in the quarter with sales of nearly 4.3 million PCs.

HP and Dell are the world leaders in sales at better than 11 million and 8.6 million unit sales respectively in the first quarter.

In his statement, Amelio said Lenovo was making “progress.”

“There is no doubt we have made strong progress in the past year, but it’s clear we need to further accelerate that progress to be as profitable and cost efficient as the rest of the industry,” he explained. “Today’s actions are necessary to enable us to reduce expenses and grow our business.”

Lenovo has reported a return to profitability with the job cuts made last year figuring substantially in the turnaround.

38 Comments

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  • sorry Apr 20, 2:40 p.m.

    no one in china lost there job

  • Tripwire Apr 20, 12:17 p.m.

    e2brtus-Actually, I was born in NC.

  • mslisac363 Apr 20, 11:46 a.m.

    I think they are just getting rid of the IBMers that they took on when the move was made. IBM sent a lot of old timers to Lenovo, which is a great move on IBMs behalf because they would not have to pay these people layoff packages. IBM tried for years to get rid of the PC production because they were making money. Why would Lenovo continue down the same road that IBM was on? I'm sure all of this was planed. I still work for IBM but it's not the best place to be.

  • e2brtus Apr 20, 11:40 a.m.

    gee whiz kids...how many of these comments were made by people who are transplants? as long as Forbes,Money mags among other publications keep listing Raleigh as THE PLACE TO LIVE and WORK, we can expect more cuts and layoffs...i love it. personally, i wish this area would experience a recession, no a FULL DEPRESSION. then maybe i could drive from downtown to Durham in less than an hour.and, God bless your little NJ heads, you whiners would go back to where you were last parolled.don't like it, get the heck out!a USA made shirt? try finding a man woman or child who was born in NC?

  • Tripwire Apr 20, 10:36 a.m.

    I knew this crap was going to happen when IBM “sold out to the Commies” China makes or has a hand in making half(or more) of everything we buy. They own us and we can’t or won’t do a thing about it. Try buying nothing but American made products. You can’t do it. I went to the mall to buy some dress shirts for work. I believe I went to every shop in the place and only found half dozen American made shirts on a table with no style selection and three times the cost. Just take an inventory of things you see around you right now. How many items are from China? How many from the USA? As Far as I’m concerned I hope Lenovo go’s completely bankrupt.

  • kursk Apr 20, 9:34 a.m.

    This is about one issue, poor management. Expense to revenue ratio was too high when it was IBM's PC Division and the problem still lingers.

    When they lay off 350 jobs in the triangle, you can bet it will be 350 individual contributors and 0 managers. The old IBM management aristocracy is clinging to their jobs because they don't have the skills or energy to do anything else. The sooner you get out, the better off you are.

  • 68_polara Apr 20, 8:37 a.m.

    Stillhere,

    Can you tell me were you have found American made clothing? I can't find any these days. It took a lot of searching but I have finally found some tennis shoes not made China. The brand is new balance. Now some of their shoes are made in China but many of them are made here in the United states to. I'll only buy those made here.

  • hear my voice Apr 19, 11:22 p.m.

    Every American should be concerned when a corporation like IBM sells it's intellectual property to a communist country. It's difficult to understand why would our government would give tax incentives to a communist company. I wonder which elected officials pocket was padded the most? They've sold their souls to the Devil!

  • dsdaughtry Apr 19, 9:49 p.m.

    so where are all these newly created jobs that Lenovo promised when they came to North Carolina? We gave many incentives for Lenovo to move to Morrisville. Where are our incentives from Lenovo?

  • ghimmy47 Apr 19, 8:28 p.m.

    Ridgerunner ... NAFTA was about North America, not China.

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