In a letter to staff, CEO Yuanqing Yang set out plans to make annual savings of £870 million at Chinese PC manufacturer
Lenovo will cut 10 per cent of white collar staff after it saw Q1 profits halve after its mobile business lost nearly $300 million.
The Chinese firm, who acquired Motorola from Google last year in a $2.9 billion deal, will slash 3,200 roles following the disappointing results, with net profit down 51 per cent to $105 million (£67 million).
The job cull will costs the manufacturer around $600 million (£384 million), but it hopes to make cost savings of annual around $1.2 billion (£770 million). It comes on the same day HTC has announced plans to cut 2,500 jobs.
In a letter to staff, Lenovo CEO Yuanqing Yang said: “In many areas we delivered solid results. But Lenovo’s goal is to deliver consistent growth in all of our businesses, and we are facing challenges.
“Our core PC business was still strong and we expanded our lead globally, but in a declining market we must continue to become more efficient and reduce expenses so we can make sure this business remains healthy and profitable.
“Meanwhile, in our two newer growth engines – mobile and enterprise – we are clearly still in the process of integrating elements of the acquired businesses and building the right business model, cost structure and competitive foundation.
“So, we must be proactive and decisive now, with all of these businesses, so that we can deliver profitable, sustainable growth and achieve our long-term goals. Though very difficult, this action will include a reduction in workforce around the world. This 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.”
In an interview with Reuters, Yang stood by the decision to buy Motorola despite handset sales at the brand falling by 31 per cent to 5.9 million units.
Overall, Lenovo sold 16.2 million smartphones in the three months ending June 30, up 2.3 per cent on the same quarter in the previous year.
It’s global market share fell during the quarter by 0.5 per cent to a 4.7 per cent share, making it the fifth largest manufacturer behind Samsung, Apple, Huawei and Xiaomi.
Overall, its Mobile Business Group, which also includes tablets and smart TVs, saw quarterly sales rise 33 per cent year on year to $2.1 billion (£1.35 billion). Motorola sales made up more than half of that ($1.2 billion). But it reported net losses of $292 million (£187 million)
In Europe, Middle-East and Africa Lenovo sales were down five per cent to $2.6 billion, or 25 per cent of Lenovo’s global total sales. It announced profit margins of 1.5 per cent in the region, up 1.9 per cent year-on-year. Mobile shipments in the region grew by 153 per cent.