Lenovo To Lay Off 3200 Staff Including OZ Employees
The Chinese PC Company who is struggling to get traction in the smartphone market has moved to slash $1.35 billion from annual expenses after earnings halved in the second quarter.
The restructuring may halt losses at the Motorola handset unit Lenovo bought last year.
In Australia Lenovo is believed to have cut retail staff who were hired after the Company moved to sell a new retail range of products via Harvey Norman and JB Hi Fi in November 2014, a move that has led to growth in the PC category for both retailers.
Falling PC sales and slowing demand in smartphones have hit Lenovo particularly hard: revenue in the three months to June grew just 3 percent year on year to $10.7 billion, missing expectations of analysts polled by Thomson Reuters.
Despite splashing out $2.9 billion on Motorola’s handset division last year, losses in the group’s mobile division widened to $292 million in the quarter, from $218 million in the preceding three months.
Lenovo is tipped to introduce the Motorola brand to the Australian market at IFA which kicks off in two weeks’ time.
Lenovo has responded by announcing plans to shed up to 5 percent of its total workforce, a move that will cost the group $600 million in restructuring charges. That may give Lenovo some breathing room as it grapples with intensifying competition
Lenovo’s goal of breaking even in its mobile business in two to three quarters will depend on the global smartphone market. Worldwide shipments for the year are expected to increase just 8.2 percent according to TrendForce data. As recently as 2014 the market grew 26.5 percent.
A shrinking PC market will also drag on Lenovo’s prospects. Revenue from what is still the company’s only profitable business dropped 13 percent compared to the same period last year due to falling sales. Personal computers account for over half of the group’s sales, and the PC market is expected to contract for the next few quarters. A lack of growth is something no amount of cost-cutting will fix.
“Last quarter, we faced perhaps the toughest market environment in recent years,” said Lenovo CEO and Chairman Yuanqing Yang in a statement. “To build long term, sustainable growth, we must take proactive and decisive actions in every part of the businesses.”
In addition to the layoffs, Lenovo will write off $300 million in unsold smartphones, and spend $600 million to restructure its smartphone businesses so that Motorola and Lenovo are more strategically aligned.
This latest earnings period has been pretty disastrous for a clutch of notable Android smartphone makers. HTC, which is now essentially worthless, outlined a new “streamlined” strategy after a $252 million loss. Over in Korea, LG’s sales dropped and Samsung’s growth slump continued, while, in Japan, Sony’s mobile business performed poorly once again, too.