Lenovo gives up jobs incentive

Lenovo has given up an $8.4 million grant the state awarded two years ago to get the computer maker to expand in Morrisville.

The company said that it could no longer meet the timetable prescribed by the state for adding jobs necessary to get the money.

Lenovo was supposed to create 400 positions by 2011.

Instead, it has trimmed its state work force from 1,800 to 1,500 as it has adjusted its strategy to become more competitive.

"We have chosen to withdraw" from the grant program, spokesman Ray Gorman said Thursday. "However, Lenovo is deeply committed to the state of North Carolina. It is home to our U.S. headquarters and the vast majority of our U.S. employees."

The Chinese company gained U.S. operations, and a Triangle presence, in 2005 when it bought IBM's personal computing division. It struggled to build its brand against industry stalwarts such as Dell and emerging rivals such as Acer of Taiwan.

The company had to retool. It pushed its products into retail stores such as Best Buy, a move IBM had shunned. And earlier this year, it laid off 1,400 people worldwide to trim costs.

Profit in its last quarter almost tripled, a sign that its restructuring is paying off. But Lenovo is unlikely to revive the fast-growth mode it once planned in North Carolina.

"I respect their approach," said Jim Fain, secretary of the N.C. Department of Commerce. "And I welcome the affirmation of their commitment to North Carolina."

The state offered the incentive in the first place to retain Lenovo, which, after buying the IBM division, had operations in Durham. The company decided to shop around to ensure the Triangle was best for its business.

It considered sites in Tennessee, Virginia and South Carolina as well as in Cary, Raleigh and Durham. Some incentives critics saw the search as a ruse to extract money to cover costs of what Lenovo planned to do anyway. Lenovo's incentives request came after the state and Forsyth County leaders promised Dell as much as $280 million to build a manufacturing plant in Winston-Salem.

The state, Wake County and Morrisville ultimately offered Lenovo as much as $14 million in assistance. The $8.4 million Job Development Investment Grant was the biggest single source of that package. Lenovo never got any money from the program.

The local incentives and other state assistance are unaffected by Lenovo's decision to give up the grant.

Though the work-force growth has not panned out, Lenovo is still deepening its roots in the state. In about two weeks, it will break ground for a third building at its $100 million Morrisville campus. And it's putting a $10 million fulfillment and distribution center in Guilford County.