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Lenovo Slash Headcount As Profits Slump 72% In The Last Quarter

Days after releasing one of the most innovative notebooks ever released by a PC Company, Lenovo Group has moved to slash their workforce after reporting that net profit of the world’s largest personal-computer maker dropped 72% off the back of a 24% fall in revenues in the last quarter.

Between five and nine percent of the Companies head count is set to be retrenched including staff in Australia, where the business is still looking for a new CEO following the promotion of former local CEO Matt Codrington.

Net profits for the quarter slumped to US$114 million while revenue fell 24% to $12.635 billion.

The move to slash jobs and marketing expenditure has been blamed on a lingering slump in the PC business.

The business that also owns Motorola, booked a recorded $249 million in restructuring costs.

During a press briefing Chairman and Chief Executive Yang Yuanqing claimed that the cuts would be “less than 5%,” shortly after this Executive Vice President and Chief Financial Officer Wong Wai Ming said the figure was closer “8%-9%.”

Both of them refused to give precise figures for the cuts.

Currently the business claims to employ 82,000 worldwide as of the end of September 2022, and if this is correct a layoff of 9% would result in up to 7,380 layoffs.

Wong called the layoffs a “rebalancing” of Lenovo’s workforce but said “there are some employees required to leave the company, because that is the way for us to continue in managing our resources.” He added that “the key is not so much about focusing on how many people. The key for us is how we deploy our resources.”

CEO Yang stressed that this is a one-time measure, saying that “the restructuring is already finished. We don’t have any further action” to be taken this year.

The total restructuring cost of $249 million relates mainly to employment, but also includes other charges such as “costs for assets write-off that are arising from restructuring,” according to the disclosure made to the Hong Kong exchange on Wednesday.

Chief Financial Officer Wong claimed during the press conference that the company has terminated a business related to “mobile phone activities,” but did not elaborate.

At this stage it’s not known whether this relates to Motorola or Lenovo mobile whose products are not sold in Australia.

Both PCs and mobile phones belong to Lenovo’s intelligent device group (IDG) business segment, which was the main cause of a 14% drop in overall annual revenue to US$61.9 billion and a 21% fall in net profit for the financial year to US $1.6 billion.

The IDG Business, which is the largest for Lenovo, saw a 21% decline in annual revenue to US$49.3 billion and a 24% dip in operating profit to $3.6 billion for the year ended in March.

Yang emphasized that the restructuring would reduce annual expenses by $850 million based on current estimates, starting from this financial year.

He projected a shift back to growth for the PC industry in the second half of the year.

Back in December 2022 Yang said, “we believe the PC market might stabilize sooner than many expect.”

Questioned at yesterday’s press conference as to whether the projection is too optimistic, Yang said his forecast is based on “real data” that the company gathers, capturing how many PCs were activated rather than simple shipment trends followed by external research companies such as IDC and Gartner.

This data comes from Microsoft who is able to track activations of new PC’s.



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