Lenovo Group will lay off 2,500, or 11 percent, of its workers worldwide in the first quarter of this year and sharply cut executives' pay to overcome the impact of the global financial crisis.
The move is part of its restructuring plan to salvage business, the world's fourth largest PC maker said Thursday.
Executive's bonuses will be cut by 30 to 50 percent to reduce operations cost.
The company would merge its China and Asia Pacific operations, too, to reduce expenses. These steps will help save $300 million by the end of next fiscal year in March 2010, though the restructuring would cost about $150 million, it said.
"The actions we are taking today are not easy," Bill Amelio, Lenovo's chief executive, said in a statement. "We believe the steps are necessary for Lenovo to compete in today's economy."
In November last year, Lenovo reported a 78 percent drop in its second quarter net profit because of sluggish demand in the corporate sector and slowing down of business in China. Corporate entities buy 60 to 70 percent of its products.
The company's share in the global PC market has dropped, too - to 7.7 percent in the third quarter ending in December from 8.2 percent a year earlier, research firm IDC said.
Lenovo has warned that it could dip into the red in the third quarter ending in December because of the slowing global economy.
The company has been expanding outside China, especially in the mature markets of the US and Europe, since acquiring IBM's PC arm in 2005. But despite that it has not been able to get a bigger share in the global market.
Simon Ye, an analyst with research firm Gartenr, said Lenovo's sluggish performance in the world market had made it more vulnerable to the economic turmoil. He suggested the company continue reducing costs.
Though Lenovo claims to have successfully integrated the IBM's PC unit with its other operations, analysts say lingering problems may be troubling it because the acquired US firm's operations cost and number of staff could still be too big.
Lenovo's shares plunged 26 percent in Hong Kong to HK$1.91 (24.6 US cents) Thursday.