Lenovo to cut 3200 jobs amid ‘severe challenges’ in its main markets

The Chinese company said it intends to shed 3,200 jobs, equal to 10 percent of its non-manufacturing global workforce and 5 percent of the entire company.

The news comes off the back of a 51 percent drop in year-on-year quarterly profits that totaled $105 million. Revenue was up 3 percent to $10.7 billion, but this was still below what the market had been expecting.

In a message to employees, Lenovo chairman and CEO Yang Yuanqing said he planned  to improve efficiency throughout the business, with the announced job losses going some way toward achieving this goal. The boss said that in an effort to return to growth, the company would restructure its mobile unit, of which Motorola is a part, to create “a much simpler, more streamlined product portfolio with a reduced number of clearly differentiated models.”

Mobile malaise

It may be the biggest PC maker in the world, but for Lenovo the smartphone market is evidently proving to be a tricky one, due in part to increased competition in the Chinese market.

Its mobile unit, which includes Motorola devices, Lenovo-branded handsets, Android tablets, and smart TVs, saw pre-tax losses of $292 million for the quarter ending June 30. This was despite ringing up revenue of $2.1 billion. Motorola, which Lenovo acquired from Google last year, accounted for $1.2 billion of that revenue thanks to sales of its Moto handsets.

In a further sign that its mobile division was under pressure, the Beijing-based company said it will be clearing around $300 million worth of smartphone inventory.

Turning to Lenovo’s more resilient PC business, which reached a 20.6 percent global share during the quarter, Yang said that with the market declining the company had to push harder to maintain its position by reducing costs and improving efficiency.

‘We do not make these moves lightly’

Addressing the proposed restructuring efforts, Yang said, “We do not make these moves lightly. I know how hard our people work. But we must ensure our long-term success and ability to meet our goals and commitments.”

Yang said that during the last quarter the company had to deal with “the toughest market environment in recent years,” though added that it was still able to produce “solid” results.