Business

Lenovo to Cut 350 Jobs in Triangle

Posted April 19, 2007 10:27 a.m. EDT
Updated April 19, 2007 7:28 p.m. EDT

— 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.