Lenovo Chairman and CEO Yuanging Yang, in an employee memo obtained by CDN, plans to reduce the company’s workforce by 3,200 people. This will include about a 10 per cent reduction in non-manufacturing headcount and about five per cent of Lenovo’s total employee base of approximately 60,000.
Yang added that this reduction is part of a broader effort to reduce expenses by about $650 million in the second half of this year and about $1.35 billion on an annual basis.
He described this action as “very difficult” in his letter to Lenovo staff, but added that the company must be “proactive and decisive now.”
“All changes will be completed ASAP. We do not make these moves lightly. I know how hard our people work. But we must ensure our long-term success and ability to meet our goals and commitments. We will act with logic and respect, speed and precision, clarity and consistency as we make these changes. When we emerge from this effort, we will be a faster, stronger, better integrated and aligned global company,” Yang said.
The move comes after Lenovo reported its financials for the first quarter. Yang said Lenovo was about to deliver “solid results” but needs to provide consistent growth in all business areas, which are facing some market challenges.
Lenovo was able to build on its lead in the core PC business but did that in a declining market. This is one of the main reasons for reducing expenses.
Secondly, the new mobile and enterprise businesses were still in the process of integrating elements from the acquisitions. Yang also said that Lenovo hasn’t yet built the right business model or cost structure for these areas.
The plan going forward will see Lenovo restructure MBG to align smartphone development, production and manufacturing.
“We will have a much simpler, more streamlined product portfolio with a reduced number of clearly differentiated models. To create a faster, leaner business model, we will leverage our global sales force across Lenovo and we will accelerate the work already well underway to maximize efficiency in our global supply chain,” Yang said in the letter.
The PC business also has a new goal: 30 per cent share in PCs. Yang believes the company can get to this goal by taking advantage of the consolidation.
Finally, the letter indicated Lenovo will work to drive greater efficiencies across all of Lenovo’s functions.