Computer giant sheds 1,000 jobs
Chinese computer giant Lenovo Group started a large-scale restructuring plan on Friday, including cutting its workforce in the Americas, Asia Pacific and Europe by 1,000.
It is the first major round of cuts since it acquired IBM's personal computer unit in December 2004.
The company is trying to reduce costs and increase efficiency amid intense competition in the market.
The world's third largest computer maker said in a filing to the Hong Kong Stock Exchange on Friday that the restructuring plan includes integrating its sales teams, streamlining operations, and centralizing its supply chain.
"These measures will help us become a more effective global competitor and maintain our leadership in innovation and customer satisfaction," said William Amelio, president and chief executive officer of the computer giant.
One of the core components is the shedding of 1,000 posts, about 5 per cent of the company's 21,400 positions worldwide.
As many as 350 jobs in Lenovo's facility in IBM's campus in Raleigh, North Caroline, will be cut, from the current 1,820 workforce there.
Mary Ma, senior vice-president and chief financial officer, said at a conference call on Friday that Lenovo would also lay off some contracted personnel.
As part of the efforts to cut costs, Lenovo will move its global headquarters from New York to Raleigh, with about 70 jobs being relocated.
The computer giant said in October that it would add 500 jobs for its new campus, as it separates its facility from IBM's in 2007.
Lenovo China will not be impacted by the redundancy plan. On the contrary, it will take over the management of Lenovo's desktop computer business, because of its good performance in controlling costs and proximity to manufacturing.
Ma said her company would integrate sales service, support and fulfilment operations together and designate an internal sales representative for every big customer to provide better services.
"We want to make Lenovo a company easier to do business with and speedier to respond," said Ma.
She estimated that the restructuring will cost US$4,1 billion, more than twice of Lenovo's net profits in its third fiscal quarter ending on December 31.
However, in the 2006-07 fiscal year, Lenovo will save US$100 million due to the restructuring and half of that will become net profits, while from the 2007-08 fiscal year on, the benefits will be about US$250 million a year.
Boosted by the announcement, Lenovo's shares in Hong Kong closed at HK$3.15 (40 US cents), 2.4 per cent higher than the previous trading day.
Ma said there would be little, if any, disruption to Lenovo's business, although the company needs to talk with employees about redundancy packages.
Beijing-based Analysys International said in a research note on Friday that the move signified Lenovo's consolidation of IBM's personal computer business, and will have far-reaching impacts on its operations.
The firm said the restructuring helps Lenovo concentrate its resources into key markets and key processes.
But it warned that Lenovo should also pay attention to the efficiency of the whole company, rather than only manufacturing costs, as it may face a rise in distribution and sales costs.
(China Daily 03/18/2006 page5)
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