1,000 staff to go in Lenovo restructuring

Tom Krazit CNET News.com

Published: 17 Mar 2006 09:50 GMT

Lenovo said on Thursday that it will cut 1,000 jobs, or about 5 percent of its staff, and integrate its global sales and back-office support as part of a restructuring plan that will cost it $100m (£60m) in charges.

The computer manufacturer said it expects to achieve annual savings of approximately $250m. Other components of the plan include moving the global supply chain closer to the manufacturing and suppliers, and moving its corporate headquarters from Purchase, New York, to Raleigh, North Carolina.

Lenovo, which completed the purchase of IBM's PC business early last year, had maintained offices close to IBM's headquarters in Armonk, New York, but wanted to move its executives closer to the product teams in North Carolina, said Julie Gottlieb, a company spokeswoman.

But Lenovo will move the bulk of its ThinkCentre development to China, Gottlieb said. A small team working on the desktops will remain in North Carolina, but Lenovo wants to take advantage of its existing desktop PC operations in China that use many of the same components as the ThinkCentre products, she said. The primary ThinkPad development team will remain in North Carolina.

Lenovo will be expanding its head count in certain regions and reducing it in others, which will result in the net reduction of 1,000 jobs, Gottlieb said. She declined to provide a region-by-region breakdown of the changes in staffing but said the Raleigh office will see its work force decrease by about 300 to 350 jobs.

Lenovo is attempting to expand its worldwide presence beyond the ThinkPad and ThinkCentre business acquired from IBM and beyond its presence in China. The company is eyeing the small-business market, but its sales force was designed for the enterprise customers that were the bread and butter of IBM's business, Martin Kariithi, an analyst at Technology Business Research, said in a research note distributed on Wednesday.

Competitors such as Dell and HP have implemented similar restructuring plans over the last year, Nicki D'Onofrio, an analyst with Current Analysis, wrote in an email interview following Lenovo's announcement. "As the PC market is becoming increasingly competitive and profit margins continue to shrink, companies have no choice but to continually look at their business and ask the question: Are we as efficient as we can possibly be?" she wrote.