Lenovo, the world’s top PC manufacturer and a leader in mobile phone, tablet and server sales, is slashing 3,200 white-collar jobs in a cost-cutting move. The cuts come after the company, which operates its global executive headquarters in Morrisville, says profits plummeted in its most recent quarter amid falling smartphone and struggling PC sales.

Lenovo employs several thousand people in the Triangle at its three-building headquarters complex in Morrisville and at its server operations complex nearby.

The job cuts will hit white-collar, non-manufacturing positions, the company said. The total represents 10 percent of the white-collar work force and some 5 percent of Lenovo’s global workforce that totals more than 60,000.

The job cuts will hit the Triangle where Lenovo maintains its global executive headquarters. A Lenovo spokesperson told WRAL TechWire that “approximately 230 positions” will be cut.

“That’s seven percent based upon current employee population of approximately. 3,200,” the spokesperson said.

No cuts will be made at Whitsett in the Triad where Lenovo operates its North American manufacturing facility, according to another Lenovo spokesperson.

Many of Lenovo’s positions in the Triangle are administrative.

“The jobs being cut run across all business units, all geographies,” Lenovo spokesman Ray Gorman told WRAL.
“Wee’re not singling out any particular work stream area.”

Layoffs will be made by the end of September. Company executives hope this move will reduce expenses for the second half of the year by $650 million.

“Lenovo had its earnings announcement last night, and although our business is performing very well in many areas, we’re not performing up to our expectations. so basically what we’re doing here is proactively taking some resource actions to cut our cost and position us for future growth,” Gorman explained.

Gorman, a former IBMer who transitioned to Lenovo when Lenovo bought IBM’s PC business in 2004, stressed that Lenovo remains committed to North Carolina.

“It’s important to remember that since 2008 and the economic downturn, we have doubled the number of jobs in the area and again, while today’s actions are difficult and hard for us to do, they are going to better the company for the long-term future growth and creating more jobs in North Carolina,” Gorman said.

North Carolina state economist, Mike Walden says that these layoffs prove that the technology industry grows in zigs and zags.

“It’s a sector-specific issue,” Walden said. “It’s not indicative of the broad economy faltering, and it’s certainly not indicative of the Triangle economy faltering. That’s not happening.”

[WTW Insider: Why the cuts? Yang Yuanqing explains in his own words.]

Lenovo has not filed any kind of mass layoff notice with the state of North Carolina, according to a spokesperson for the N.C. Department of Commerce.

In a conference call with analysts, Lenovo executives focused most of their job and cost-cutting initiatives on Motorola, which is headquartered in Illinois.

The cuts are the third made by Lenovo this year. In January, an undisclosed number of veteran workers were offered buyouts, which came after the Lenovo workforce ballooned following two major aquisitions last year.. In May, Lenovo cut 155 jobs at its server business in the Triangle and 235 people overall.

The company also recently offered buyouts.

Although losing a job is always tough, Walden said that there is a sliver lining for those in the Triangle.

“If you’re going to be unemployed, this is a pretty good place to be in because people are hiring here. People are still moving here. Companies love this area,” Walden said.

Lenovo also is undertaking another reorganization – one of several made over the past two years as the company has sought to absorb Motorola Mobility and IBM’s x86 server business that cost the company more than $5 billion. Those deals closed last year.

A key part of the reorganization is entrusting future phone design to the Motorola unit.

The news sent Lenovo shares down 9 percent on the Hong Kong stock exchange.

In an interview with Reuters, Lenovo Chair and CEO Yang Yuanqing stood by his decision to acquire Motorola Mobility from Google for nearly $3 billion.

“I still believe mobile is a new business we must win,” Yang told Reuters.

“I still believe this acquisition (Motorola) was the right decision…Except Apple and Samsung there is no third strong (global) player. I believe that will be Lenovo.”

The job cuts will cost the company some $600 million in severance and other expenses but produce savings of $1.35 billion, the company said.

Lenovo reported revenues of $10.7 billion, which actually was up 3 percent year-over-year. However, the total missed analysts’ estimates as polled by Thomson Reuters of $11.29 billion.

However, profits fell 51 percent to $105 million.

Analysts had projected an even bigger drop of 59 percent.

Yang said the PC and phone markets present the “toughest market environment in recent years.”

“Last quarter, we faced perhaps the toughest market environment in recent years, but we still achieved solid results,” Yang said in a statement.

“Our PC business remained number 1 for the 9th straight quarter. In the smartphone business, our strategic shift from China to the rest of world has paid off. And our combined enterprise business achieved operational PTI [pre-tax income] 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.”

The reorganization

In a statement, Lenovo called the layoffs and other changes as “broad, decisive actions – including better aligning its businesses and significantly reducing costs – to return to profitable, sustainable growth and achieve its long-term goals.”

Lenovo spelled out the reorganization as follows:

  • “Restructuring the Mobile Business Group (MBG) to align smartphone development, production and manufacturing and better leverage the complementary strengths of Lenovo and Motorola. There will be a more-simple, streamlined product portfolio, with fewer, more clearly-differentiated models. A faster, leaner business model will better leverage Lenovo’s global sales force and accelerate the efficiency actions already underway in its global supply chain. MBG will continue to drive the overall mobile business, but will now rely on Motorola to design, develop and manufacture smartphone products.
  • “Focus and repositioning the Enterprise Business Group to attack the most relevant and attractive market segments, while increasing overall speed and cost-competitiveness.
  • “Accelerating the drive for 30 percent share in PCs by better taking advantage of consolidation, while becoming even more efficient and reducing costs to ensure sustainable, profitable growth.
  • “Drive for greater efficiency across all of Lenovo’s functions. Lenovo will better leverage technology, the internet and innovative approaches in every function to drive transformation and become faster and more customer-centric.”

Read the full earnings report at: