Lenovo and Razer have revealed the Lenovo Y Series Razer Edition desktop PC. (Photo : Reuters)
Lenovo Group Ltd. has announced that it will restructure and cut jobs amid integration of two major acquisitions, after it reported a 51-percent drop in earnings during the first quarter.
The announcement caused the shares of the Chinese PC maker, which bought Motorola Mobility and International Business Machines (IBM) Corp.'s low-end server unit last year, to the lowest levels that they have seen in almost 18 months.
Lenovo, as well as other Chinese tech companies, are facing problems as the global personal-computer market continues to contract and China's smartphone market is all but saturated.
Yang Yuanqing, chief executive of Lenovo, said that the past quarter was arguably "the toughest market environment in recent years."
As the world's largest PC maker by shipments, Lenovo said on Thursday that it would cut 10 percent of its nonmanufacturing positions, around 3,200 people, which accounts for 5 percent of its total head count. The move is part of a $650-million cost-cutting program for the second half of the fiscal year.
Analysts have had negative predictions about Lenovo's near-term future.
According to market research firm IDC, the global PC market contracted 11.8 percent in the second quarter and the Chinese smartphone market shrank in the first quarter for the first time in six years.
Patrick Moorhead, principal analyst of Moor Insights & Strategy, said that "the market has eroded faster than anyone had predicted. All bets are off at this point."
Regarding the restructuring plans, Yang said that he will restructure Lenovo's mobile business, launching fewer models and putting a greater focus on the recently acquired Motorola brand.
According to Counterpoint Research, after buying Motorola, Lenovo rose to the third highest spot in global smartphone rankings, but it fell to the number five spot in the second quarter, having 4.5 percent market share.
Two other Chinese smartphone companies, Huawei Technologies Co. (HTC) and Xiaomi Corp., surpassed Lenovo in shipments that quarter.
Lenovo also plans to refocus its enterprise business, including the newly acquired IBM server unit.
Net profit for Lenovo for the fiscal first quarter was $105 million, less than half of the $214 million net profit it had in the earlier quarter. However, it still earned more than analysts expected, beating the projected net profit of $86.7 million.
Revenue for the period rose from 10.4 billion to 10.7 billion, going up 3 percent.
