Len­ovo cuts 3,200 jobs along­side plung­ing prof­its

The Pak Banker - - COMPANIES/BOSS -

China's Len­ovo Group Ltd will lay off 10 per­cent of white-col­lar staff af­ter sales of Mo­torola hand­sets fell by a third, rais­ing doubts over the per­sonal com­puter gi­ant's bet that a money-los­ing brand it bought for nearly $3 bil­lion will help it be­come a global smart­phone leader.

Shares in the world's big­gest maker of PCs slid nearly 9 per­cent on Thurs­day af­ter it said its quar­terly net profit was halved as its mo­bile di­vi­sion lost nearly $300 mil­lion. Len­ovo, which uses the U.S. dol­lar in oper­a­tions rather than the re­cently de­val­ued Chi­nese yuan, said it plans to cut about 3,200 non-man­u­fac­tur­ing jobs with a one-time cost of $600 mil­lion.

Bei­jing-based Len­ovo said the restruc­tur­ing would yield sav­ings of about $1.35 bil­lion on an an­nual ba­sis. But the dif­fi­culty in selling hand­sets, com­bined with a con­tin­u­ously shrink­ing global mar­ket for PCs, meant the firm was fac­ing its "tough­est mar­ket en­vi­ron­ment in re­cent years", Chief Ex­ec­u­tive Yang Yuanqing warned. "I still be­lieve mo­bile is a new busi­ness we must win," Yang told Reuters in an in­ter­view, say­ing Len­ovo's am­bi­tion to ri­val Ap­ple Inc and Sam­sung Elec­tron­ics Co in smart­phones re­mains undimmed.

"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." Mo­torola, bought from Google Inc last year for $2.91 bil­lion, shipped 5.9 mil­lion hand­sets in the quar­ter, a 31 per­cent de­cline from a year ear­lier. Yang cited poor sales in Brazil and China, say­ing Len­ovo would pri­or­i­tize mar­ket­ing smart­phones out­side its home turf, where mar­ket sat­u­ra­tion and price wars have hob­bled firms from Sam­sung Elec­tron­ics to do­mes­tic startup Xiaomi Inc.

"The mar­ket was wor­ried about a slow­down at Mo­torola and the China mar­ket share de­cline, and then they re­ported the in­vestors' worst fears," said No­mura an­a­lyst Leping Huang. He said the stock drop could have been worse: "It's quite pos­i­tive they can move so quickly to an­nounce cost re­duc­tions and in­ven­tory write­offs." For the quar­ter, rev­enue rose 3 per­cent to $10.7 bil­lion, but missed an­a­lyst ex­pec­ta­tions for $11.29 bil­lion, ac­cord­ing to an­a­lysts polled by Thom­son Reuters SmartEs­ti­mates. Net profit plum­meted 51 per­cent to $105 mil­lion, but an­a­lysts had es­ti­mated it would fall 59 per­cent.

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