Lenovo set to cut 2,500 jobs in 2009 and restructures

The company expects to reduce the number of its employees during 1Q 2009

Approximately 11 percent of its total workforce will be affected and this includes management and executive positions.

The company is also reducing expenses in support and staff functions, such as finance, human resources, and marketing.

Lenovo also plans to reduce executive compensation by 30 to 50 percent, including merit pay and long-term incentives, as well as any performance payments for the coming year.

The vendor claims these actions in total will help take advantage of Lenovo’s strengths as a global organisation to better align its resources with shifting customer demands in the current marketplace.

Yang Yuanqing, Lenovo’s chairman of the board said in a media statement that although the integration of the IBM PC business for the past three years was a success, its last quarter’s performance did not meet expectations.

“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,” he said.

As part of the restructuring, Lenovo is consolidating its China and Asia Pacific organisations, which are currently run as separate business units, into a single business unit – Asia Pacific and Russia (APR).

The new organisation will help the company reduce its operating expense and eliminate duplicative support and staff functions, claimed Yuanqing.

APR will be headed by Chen Shaopeng, currently senior vice president, and president, Greater China, while David Miller, senior vice president and president, Asia Pacific, will remain with Lenovo for a transition period.

The hardware vendor also announced that the company will relocate its call centre operations from Toronto to Morrisville, North Carolina, the company’s main site in North America.

Additionally, Scott DiValerio, senior vice president and president, Americas, who has led the Americas Group sales organisation for the past year, will be leaving the company.

The Americas Group will now report to Rory Read, senior vice president, operations, as part of Lenovo’s streamlining efforts

These restructuring actions will help the company expects to save US$300 million in the 2009/2010 fiscal year (ending March 31, 2010).

The company anticipates taking a pre-tax restructuring charge of approximately US$150 million, most of which will be taken in the fourth fiscal quarter (ending March 31, 2009).

Approximately US$24 million of the restructuring charges were booked in Lenovo’s second fiscal quarter (ending September 30, 2008).

The company also expects to report a loss for the third fiscal quarter that ended December 31, 2008 – which is yet to be reported.

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