Blaming the global economic downturn and a shortfall in the execution of its strategic plan, Lenovo Group said it is slashing jobs after reporting a 78 percent drop in 2008 second-quarter earnings Friday.
"In light of unprecedented worldwide economic challenges, Lenovo is eliminating jobs in some locations between now and the end of the year, on a country-by-country basis," Lenovo wrote in a statement.
Lenovo has 1,680 employees in the U.S. and 23,200 global employees. Jobs cut this year would be in addition to a lay off of 1,400 employees last year.
In the quarter, Lenovo's worldwide PC shipments were up 7.4 percent, which lagged behind industry shipment growth due to weakened commercial and public sector PC demand and slower growth in the China market, the company said.
Lenovo's notebook computers continued to be the largest contributor to total sales. Notebook shipments in the second fiscal quarter climbed 21 percent year-over-year, and consolidated sales grew 4 percent to $2.6 billion, or 60 percent of total sales for the quarter.
The company only recently began notebook shipments in the entry-level segment and consumer market outside China, which impacted its overall performance compared to the market, according to Lenovo.
Lenovo's desktop shipments for the quarter fell 3 percent year-over-year, in line with the market, according to the company. However, consolidated sales decreased 5 percent to $1.7 billion in the quarter, or 38 percent of total sales.
The Beijing-based company reported $1.1 billion in consolidated sales, or 25 percent of the company's total sales, in the Americas. Lenovo said slowing commercial demand and aggressive competitive pricing impacted profitability in the geography.
Total profit for the quarter was $23 million vs. $105 million in the same period a year ago. In total global sales, the company inched up just 0.4 percent to $4.33 billion
Still, the company said it remained optimistic about future results. Lenovo President and CEO William Amelio said in a statement that in creating a world-sourcing business model, it is starting to see "major dividends in this strategy in terms of improved serviceability, margin and supply chain efficiency."