Asian impact from Lenovo restructuring unclear

Industry analysts in the region have mixed views about the China-based PC maker's internal reorganization, which will include job transfers and layoffs.

It is still unclear how Lenovo's restructuring plans to boost its efficiency in an increasingly competitive PC market will impact its Asia-Pacific operations, but analysts are divided on how the China-based company's future will play out.

In a statement released Thursday, Lenovo said it is planning a "resource reduction" of 1,400 Lenovo workers and contractors worldwide, to be completed primarily within the next 12 months. Slightly more than half of these "reductions", however, will be in the form of transfers to emerging markets, so the total job loss will be closer to 650.

When contacted by ZDNet Asia, a Lenovo Asia-Pacific spokesperson based in Singapore declined to comment if staff in this region will be affected, but said the impact of the restructuring is global. A majority of the 750 jobs scheduled for re-designation will go to emerging markets such as Eastern Europe, Brazil, India and other parts of the Asia-Pacific region.

According to the company spokesperson, restructuring activities will focus on areas that cut across several functions and geographies. These steps are "designed to help Lenovo grow faster and grow more profitably [and] close the efficiency gap between Lenovo and the rest of the industry", she said.

Lenovo has set goals to better organize its investments and resources, and streamline its supply chain and sales and marketing divisions. Key customer support functions will be further integrated, and software testing will also be integrated into its China-based facilities.

Earlier this week, the PC maker announced a deal with Microsoft in which the two would collaborate on a Beijing-based research and development (R&D) lab. The facility will focus on mobile technology and products built for Microsoft's software.

Lenovo's Singapore-based spokesperson declined to say if the company's internal restructuring will have any impact on this initiative with the software giant.

Restructuring to mix reviews
Analysts contacted by ZDNet Asia expressed mixed views on Lenovo's plans to restructure its operations.

Shaun Rein, managing director of China Market Research Group, said in an e-mail interview: "Lenovo has been hit hard in its home market of China. Their product lines are not dazzling and customer service has dropped."

Rather than focus on putting out "good quality hardware" that consumers want, Rein noted that the company spent too much time on the ThinkPad acquisition and branding the "ThinkPad by Lenovo" tagline and on becoming a global leader.

"The restructuring is more of a desperate attempt by Lenovo to [improve on] their numbers since they have been unable to do it by increasing sales," he said. "If Lenovo wants to get back into better shape, they need to refocus on their core competency in the China market by setting up more sales channels in China's fourth- and fifth-tier cities, develop better looking computers that appeal to their target markets, and stop spending so much time on their global aspirations until they turn around their China operations."

Meanwhile, Rein noted, Hewlett-Packard is becoming a threat to Lenovo's footing in the Asia-Pacific PC market.

"I think Lenovo's biggest competitors will be HP and some of the cheaper Asian manufacturers like Acer, which are producing some pretty good quality and cheap computers," he said. "HP has set up much better sales channels recently and has been offering good prices and good quality products to consumers. Their printers have also helped as many consumers want to buy computers and printers from the same vendor."

He added that the PC business has become so commoditized that manufacturers must create a premium for their computers based on design, he said. "Apple has done the best job of this, but Sony and Samsung are doing pretty well, too."

Bryan Ma, IDC's director for Asia-Pacific personal systems research, told ZDNet Asia in a phone interview that Lenovo's decision to restructure the company internally is a "good effort to really pull it altogether and move forward".

"Since the merger [in 2005], they've been moving backward and haven't quite settled in on pulling everything together," Ma said. "This announcement is reassuring to me in that we're finally seeing a good concrete plan, where they're starting to move ahead. Hopefully, it'll be an indication that Lenovo will see more [operational] efficiency and interoperability as we go along."

"The company, since the merger, has had so many different entities trying to come together, [and] what we are seeing now is that they are taking these steps in order to make sure the new company can run efficiently as one unit," the IDC analyst explained.

"Clearly, they are thinking in terms of how to respond more quickly to their customers [and] how to internally make sure their operations are efficient," Ma said, adding that this is a necessary step for Lenovo in that direction in order to really move ahead.