Lenovo to slash 11% of work force; net of 100 jobs leaving RTP

Posted January 7, 2009
Updated January 8, 2009

Lenovo's HQ in Morrisville
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— Lenovo Group said Wednesday it will lay off 2,500 workers, or about 11 percent of its work force, as part of a plan aimed at helping the computer maker remain competitive amid the global economic downturn.

The company, which is the world's fourth-largest PC maker, also warned that it expects to report a loss for its fiscal third quarter, which ended Dec. 31. Lenovo's headquarters is in Morrisville. Most of its operations are in China.

The restructuring will mean a net loss of 100 jobs for the Triangle, according to company spokesperson Ray Gorman. Lenovo said it would close a call center in Toronto, Canada, and move those jobs to Morrisville.

However, some 250 jobs will be cut in the Triangle, Gorman said. The hires for the call center work will be made locally, he added.

The 250 cuts in the Triangle will be made in “all functions,” Gorman said. “It’s across the board.”

The layoffs are expected to be completed by the end of the first quarter, Gorman said.

Lenovo now employs around 1,700 people locally. Recently, 50 positions were eliminated as part of cross-company, cost-cutting moves. Hundreds of former IBM employees have left or been laid off since Lenovo acquired IBM's PC division in 2005 for more than $1 billion. IBM's PC group was based primarily in the Triangle.

Lenovo shares plunged in trading overnight and closed at under 30 U.S. cents.

"This is something they have to do. If they don't do it, the company will have a huge loss," said J.P. Morgan & Co. analyst Charles Guo. "We believed they had to do something drastic. This 11 percent is within our expectations."

Lenovo has been hit especially hard by global turmoil because corporate customers that account for 60 to 70 percent of sales are slashing spending, Guo said.

"Overall, it will be quite difficult for Lenovo in the next nine to 12 months," he said.

"This move will enable Lenovo to better leverage its investment in real estate and facilities and better serve its customers by bringing the call center team closer to its marketing and sales functions," Lenovo said in a statement.

The company did not spell out layoffs by location.

At least two senior executives were affected by personnel decisions.

Scott DiValerio, president for Lenovo’s operations in the Americas, who led the sales organization, “will be leaving the company,” Lenovo said. Rory Read, senior vice president for operations, will assume his post.

Also leaving is David Miller, head of Asia Pacific operations. He “will remain … for a transition period,” Lenovo said. He will be replaced by Chen Shaopeng, president of Greater China operations.

Chinese media had reported Miller’s departure.

On Wednesday in Hong Kong, where Lenovo shares are traded, the company suspended stock action and warned that a statement with financial implications would be made Thursday.

“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.”

Yang maintains a home in the Triangle.

"As hard as this news is for all of our Lenovo employees, we believe the steps we are taking today are necessary for Lenovo to compete in today's economy and, in the long run, will help us to continue to deliver exceptionally engineered PCs to our customers worldwide," William J. Amelio, Lenovo's chief executive, said in a statement.

Lenovo said the job cuts will come from across the company's global operations.

The company also plans to cut executive compensation by between 30 and 50 percent, including merit pay, long-term incentives and other performance-based payments this year.

In addition, Lenovo said it is consolidating its Asia Pacific and China operations into a single business unit.

Lenovo expects to save about $300 million in the fiscal year ending March 31, 2010, as a result of its restructuring plan. It anticipates the changes will bring a pretax charge of about $150 million, the bulk of which will be taken in the fourth quarter of the current fiscal year.

Lenovo's quarterly profit shrank 78 percent in the three months ended Sept. 30. as the global economic slowdown battered sales.


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  • Eduardo1 Jan 8, 2009

    As I stated in a earlier post, we have created our own doom. We have sold out to China in so many areas. The PAPER that they own in US companies, real estate, Stock market, they will never have to invade us, they can do it economically. We are so busy looking at Islamic Terrorists, that we are not looking at foreign powers: China, India, Japan, etc, buying us out

  • domotamasi Jan 8, 2009

    Laid off last year from Lenovo with a good package and time to adjust and find new employment. I took the skills, experience and business knowledge gained by working for many years at IBM and Lenovo and parlayed that into a less stressful job with a good company. Happy, survived, moved on. With the current economy it may be more challenging to find a job, but leverage your skills and realize that many others have gone before you and have survived. Good luck to those being laid off.

  • GWALLY Jan 8, 2009

    People...your are looking at your future!!! A lack of domestic manufacturing = servitude!!!

  • mstan Jan 8, 2009

    Doubletap- You are right, they are taking advantage of our own corporate greed. Woud the USA do any different if we had the chance? We are responsible for our own futures. I agree with your point, but I think the blame is misguided.

  • 050462 Jan 8, 2009

    this is old news,get out and learn new skills

  • original intent Jan 8, 2009

    This whole economic fiasco was orchestrated.the govt/corps played on people's want more and better for themselves and their a carrot was dangled in front of us and we bit.We spent money in our savings or charged it...and no have nothing but "stuff" to show for it! Stuff that will not pay future bills!! There is the largest market correction in history going on,,but most governments are trying to prop up a failed economic model! Here's what Thomas Jefferson said: I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people,to whom it properly belongs!

  • ncguy Jan 8, 2009

    Big blue is gone bye bye.

  • doubletap357 Jan 8, 2009

    No China is our enemy; they are simply taking advantage of our own corporate greed to overcome us economically rather than militarily. Ultimately the end will be the same. The corporate heads and government leaders who knowingly played into their hands are traitors as far as I'm concerned. You are right though about one thing, we are all complicit in our own downfall.

  • doubletap357 Jan 8, 2009

    MoroccoMole, that's why I don't buy IBM products either, As far as I'm concerned they are sellouts. I didn't mean to dis the many hardworking individuals who may be working for Lenovo. I hate the company because it is Chinese, simple as that.

  • doubletap357 Jan 8, 2009

    The American sector of Lenovo may be run by American executives but the bottom line is that the company is a Chinese company not an American company. The American executives still answer to the bigwigs in China.