Lenovo swings axe on five per cent of staff

Shrinking PC market takes its toll as 'non-manufacturing' roles face the chop

PC giant Lenovo is taking what it labels as "decisive actions" to transform its business as it suffered a whopping 51 per cent drop in first-quarter net profit.

Overall turnover actually climbed 10 per cent on Q1 last year to $10.7bn (£6.8bn) when foreign exchange impacts were taken out of the equation, but in real terms with exchange rates factored in, the increase was three per cent. Net profit stood at $105m, down from $214m in the same quarter the previous year.

The Chinese manufacturer, which is currently number three in the US market, admitted to facing "severe challenges" in its main markets, with a continually declining PC and tablet market, and increased competition in the smartphone space - particularly in China. Last year, it acquired Motorola from Google for $2.9bn, vowing to become a major player in the smartphone market.

On the back of its latest results, the firm revealed it would be slashing costs by $650m in the second half of the year, and $1.35bn on an annual basis.

This includes shedding 3,200 people in its global "non-manufacturing" workforce, or five per cent of its total 60,000-strong global workforce.

It also mentioned a restructuring of the mobile business group, with a "more simple, streamlined product portfolio", or fewer models.

It also vowed to grab 30 per cent of the global PC market, an almost 10 per cent increase on its current market share of 20.6 per cent.

Yuanquing Yang, CEO of Lenovo, said: "Last quarter, we faced perhaps the toughest market environment in recent years, but we still achieved solid results. Our PC business remained number one for the ninth straight quarter.

"In the smartphone business, our strategic shift from China to the rest of the world has paid off. And our combined enterprise business achieved operational PTI 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 share and improve profitability. We will come through these efforts as a faster, stronger and better-aligned global company."