Lenovo plans could include 1,000 layoffs

PC maker is mum on reports

Lenovo might be planning 1,000 layoffs worldwide to cut costs in the ultra-competitive PC market, according to newspaper and wire reports from Asia.

The Chinese computer manufacturer has made a preliminary plan to shed positions in China and the United States, Reuters and the South China Morning Post reported Tuesday, citing unnamed sources. Some employees would be redeployed; others would lose their jobs.

If there are cuts in the United States, they would likely have a big effect in the Triangle, where the company employs about 75 percent of its U.S. work force. Lenovo's operation in Research Triangle Park lost about 330 positions in layoffs announced a year ago.

Lenovo has been trying to shape up IBM's money-losing personal computer business since acquiring it for $1.25 billion in 2005. Lenovo has about 1,600 workers in the Triangle, many of them former IBM employees.

The news outlets reported Tuesday that Lenovo is considering a second restructuring because earlier cost-cutting measures weren't as effective as expected.

The reports, which agreed on the total number of layoffs, differed slightly in their geographic focus. The South China Morning Post, an English-language newspaper in Hong Kong, said that the shake-up would affect 400 positions in China; Reuters said the job cuts would be mostly in the United States.

Lenovo has about 24,500 employees, including 19,000 in China, 2,000 in the United States and 1,700 in Europe. The rest are scattered around the globe.

The cuts could save Lenovo at least $150 million a year, after a one-time charge of $50 million to $75 million, the reports said.

Company spokesman Ray Gorman said he would not confirm or deny the reports.

Not everyone is accepting the layoffs as fact.

Asian analysts quoted in the South China Morning Post don't expect restructuring beyond last year's cuts, which affected about 1,000 employees worldwide. With profits rising 23 percent in the most recent quarter to $57.7 million, they said Lenovo's business is on the right track.

But Brent Bracelin, an analyst with Pacific Crest Securities, said in an interview Tuesday that he wouldn't be surprised to see Lenovo trim its operations to boost profits, particularly in the United States. The company, which has struggled to gain traction in the U.S. market, said shipments in the North American market fell 4 percent in the third quarter.

Although Lenovo has done a good job of shoring up the IBM division's profitability, there's more work to be done -- likely including layoffs in the United States, Bracelin said.

Still, as Lenovo tries to distinguish its products from the competition, jobs in research and development probably would be the last area Lenovo would cut, he said. Research and development is one of the company's major divisions in the Triangle.

"I would look at the cost-reduction actions ... as more of trying to better position the company to sustain profitability over the next six months, which may be ... short-sighted over the long-term," he said. "We'll see."

The Chinese computer maker continues to invest in its Triangle operation, including its new $154 million headquarters in Morrisville. Most of its employees have moved into two buildings on the campus, leaving former IBM buildings in RTP.

The Triangle also has received the vocal support of the company's chief executive, who worked at IBM in RTP for four years.

CEO Bill Amelio said in October that he was impressed with the remarkable work being conducted in RTP. "We'd be foolish not to continue to grow that opportunity here," he said.