Lenovo has announced a "resource redeployment plan" of layoffs, cutbacks and consolidation as part of a move to become more efficient in the wake of changing economic conditions. Basically, the company's earnings were disappointing last quarter and the cutbacks are meant to improve its fiscal standing. It's expecting a loss for the third quarter that ended December 31.
The actions announced today include:
- Reduce workforce by 2,500, or 11 percent, in Q1, including management and executive positions.
- Reduce executive compensation by 30-50 percent, including merit pay and incentives.
- Reduce expenses in support and staff functions such as finance, human resources and marketing.
- Consolidate China and Asia Pacific organizations into a single business unit called Asia Pacific and Russia (APR), to be headed by Chen Shaopeng, currently senior vice president, and president, Greater China. David Miller, senior vice president and president, Asia Pacific, will remain with Lenovo for a transition period.
- Relocate call center operations from Toronto to Morrisville, N.C., the company’s main site in North America.
Additionally, Scott DiValerio, senior vice president and president of the Americas Group, will be leaving the company.
The company expects to realize a savings of about $300 million in the fiscal year that ends March 31. It also expects to take a pre-tax restructuring charge of about $150 million in the fourth quarter. William J. Amelio, Lenovo’s president and chief executive officer, said in a statement:
The actions we are taking today are not easy, and we will act with compassion and respect for the individuals in our company who are most affected. As hard as this news is for all of our Lenovo employees, we believe the steps we are taking today are necessary for Lenovo to compete in today’s economy, and in the long run, will help us to continue to deliver exceptionally engineered PCs to our customers worldwide.