Tough task ahead

Beijing, March 18 (PTI): Chinese computer giant Lenovo, which acquired IBM's personal computer business, has launched a large-scale restructuring plan that includes slashing its workforce in the Americas, Asia Pacific and Europe by 1000.

It is the first major round of cuts since Lenovo acquired IBM’s personal computer unit in December 2004.

The company is trying to reduce costs and increase efficiency amid intense competition in the market, the official ‘China Daily’ reported.

In a filing to the Hong Kong Stock Exchange yesterday, the company said the restructuring plan includes integrating its sales teams, streamlining operations and centralising its supply chain.

“These measures will help us become a more effective global competitor and maintain our leadership in innovation and customer satisfaction,” president and chief executive officer of the company, William Amelio, said.

One of the core components is the shedding of 1000 posts, about five per cent of the company’s 21400 positions worldwide.

As many as 350 jobs in Lenovo’s facility at the IBM campus in Raleigh, North Caroline will be cut from the current workforce of 1820 employees there.

Mary Ma, the company’s senior vice-president and chief financial officer, said at a conference call yesterday that Lenovo would also lay off some contracted personnel.

As part of the efforts to cut costs, Lenovo will move its global headquarters from New York to Raleigh, with about 70 jobs being relocated.

In October 2005, Lenovo had announced it would add 500 jobs for its new campus, as it will detach its facility from IBM’s in 2007.

Lenovo China will not face the consequences of the redundancy plan. On the contrary, it will take over the management of Lenovo's desktop computer business because of its good performance in controlling costs and proximity to manufacturing. Ma said her company would integrate sales service, support and fulfilment operations and designate an internal sales representative for every big customer to provide better services.

“We want to make Lenovo a company easier to do business with and speedier to respond,” Ma said.

She estimated that the restructuring would cost $4.1 billion, more than twice of Lenovo's net profits in its third fiscal quarter ending on December 31.

However, in the 2006-07 fiscal, Lenovo will save $100 million due to the restructuring and half of it will become net profits. From the 2007-08 fiscal onwards, the benefits will be about $250 million a year.