Lenovo Announces 11% Work Force Reduction

Just a day after making a splash at the Consumer Electronics Show with its thin PCs, Lenovo on Jan. 7 announced plans to lay off 2,500 employees worldwide during the first quarter of 2009, representing about 11 percent of its work force.

The Singapore-based PC maker with U.S. headquarters in Research Triangle Park, N.C., said in a statement that the changes would "help the company increase its efficiencies and become more competitive in the face of the continuing global economic downturn."

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Lenovo said it also plans to reduce executive compensation by 30 to 50 percent, including merit pay and long-term incentives, as well as performance payments in 2009.

As part of the reorganization, Scott DiValerio, Lenovo senior vice president and president for the Americas, who has led the Americas Group sales organization for the past year and had sometimes been credited as the architect of Lenovo's current channel program, will be leaving the company. The Americas Group will now report to Rory Read, senior vice president of operations, Lenovo said in its statement.
 
"Although the integration of the IBM PC business for the past three years was a success, our last quarter's performance did not meet our expectations," Yang Yuanqing, Lenovo's chairman of the board, said in a statement. "We are taking these actions now to ensure that in an uncertain economy our business operates as efficiently and effectively as possible, and continues to grow in the future."

Lenovo also said it would relocate its call center operations from Toronto to Morrisville, N.C., the company's main site in North America. Lenovo said the move is designed to help it make the most of its real estate and facilities investments, and also help it better serve customers by bringing the call center team closer to its marketing and sales functions.

As part of the reorganization, Lenovo will consolidate its China and Asia Pacific organizations, currently operated as separate business units.

Lenovo expects the reorganization to save the company $300 million during its 2009 to 2010 fiscal year, which ends March 31, 2010.

"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," William J. Amelio, Lenovo's president and CEO, said in a statement. "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."