Lenovo is planning to go the way of the old Roman legions and decimate more than 10 percent of its white collar workers. Not that that the Romans had white collar workers and Lenovo is not planning to beat its workers to death.
The outfit said that it will have to lay off 10 percent of white collar staff after sales of Motorola handsets fell by a third.
This raises doubts over the personal computer giant’s bet that a money-losing brand it bought for nearly $3 billion will help it become a global smartphone leader.
In fact, many wonder why Lenovo is not putting its rather nice smartphones on the market in the EU and is depending on its Motorola brand instead.
Lenovo said its quarterly net profit was halved as its mobile division lost nearly $300 million. Lenovo, which uses the US dollar in operations rather than the devalued Chinese yuan, said it plans to cut about 3,200 non-manufacturing jobs with a one-time cost of $600 million.
Chief Executive Yang Yuanqing said the restructuring would yield savings of about $1.35 billion on an annual basis. But the difficulty in selling handsets, combined with a continuously shrinking global market for PCs, meant the firm was facing its “toughest market environment in recent years.”
Yang added that the Motorola deal was the right decision. Other than Apple and Samsung there is the third strong (global) player must be Lenovo.
Motorola, bought from Google last year for $2.91 billion, shipped 5.9 million handsets in the quarter, a 31 percent decline from a year earlier. Yang cited poor sales in Brazil and China, saying Lenovo would prioritize marketing smartphones outside its home turf, where market saturation and price wars have hobbled firms from Samsung Electronics to domestic startup Xiaomi.
Lenovo revenue rose 3 percent to $10.7 billion, but missed analyst expectations for $11.29 billion. Net profit plummeted 51 percent to $105 million, but analysts had estimated it would fall 59 percent.
Looking ahead, executives downplayed the effect of China’s yuan depreciation, saying the company was well hedged and its gross margins would be largely unaffected.