Lenovo Announces 11% Work Force Reduction

By Jessica Davis  |  Print this article Print

PC maker Lenovo will lay off 2,500 employees worldwide in the first quarter of 2009 as part of a broad reorganization that will also include reductions in executive compensation and the relocation of a call center. Americas sales organization leader Scott DiValerio will leave the company, replaced by Rory Read, a senior vice president of operations.

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."

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."

Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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