Lenovo to cut 3,200 jobs after Q1 profits slump 51pc

13 Aug 2015

Lenovo has reported its toughest operating quarter in recent years, facing struggles in the PC market and smartphones.

Chinese technology giant Lenovo is to axe 3,200 non-manufacturing jobs after reporting a 51pc drop in first quarter net profit to US$105m.

The 3,200 job cuts will form part of Lenovo’s US$650m cost-cutting effort.

Like HTC, Lenovo is struggling in the face of a saturated smartphone market dominated by high-end players like Apple and low-end players like Xiaomi, leaving little room in between.

It is also struggling with a PC market that continues to contract.

Other markets like Brazil and Latin America were hit by macroeconomic challenges.

‘Last quarter, we faced perhaps the toughest market environment in recent years, but we still achieved solid results’

Lenovo still dominates the PC market, with a record worldwide market share of 20.6pc, and is No 3 in the critical US market.

In smartphones, Lenovo shifted its focus from a carrier-led business model to the open-market approach espoused by Xiaomi and One Plus. It said that intense competition affected profitability in its Motorola division, in particular.

Quarterly revenue was US$10.7bn, up 3pc, however, this was offset by the 51pc decline in net profit.

Cost-cutting at Lenovo to continue

“Last quarter, we faced perhaps the toughest market environment in recent years, but we still achieved solid results,” said Yuanqing Yang, chairman and CEO of Lenovo.

“Our PC business remained No 1 for the ninth straight quarter. In the smartphone business, our strategic shift from China to the rest of world has paid off. And our combined enterprise business achieved operational PTI (pre-tax income) for the third consecutive quarter.

“But to build long-term, sustainable growth, we must take proactive and decisive actions in every part of the businesses. We will further integrate elements of the acquisitions with our legacy businesses in mobile and enterprise, while building the right business model and cost structure.

“We will reduce costs in our PC business and increase efficiency in order to leverage industry consolidation, increase shares and improve profitability.  We will come through these efforts as a faster, stronger and better-aligned global company,” Yang said.

Lenovo image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years