Lenovo To Cut 1,400 Jobs

Lenovo Group President and CEO William J. Amelio and Chief Operations Officer Fran O'Sullivan were at the Research Triangle Park facilities Thursday morning meeting with groups of employees regarding the layoffs, which amounted to roughly 5 percent of the company's worldwide workforce.

Lenovo must become "more efficient by reducing expenses" to win in the PC business, Amelio said in a statement. Lenovo expects savings from the cutbacks to total $100 million in the 2007-08 fiscal year, which began April 1. Most of that savings will be reinvested into the business to support the company's strategic initiatives.

The job cuts at the Research Triangle Park facility -- which houses product development, sales and marketing, global supply chain and software testing -- amount to 350 employees.

At the same time, Lenovo said it aims to add 750 positions in emerging markets, including Slovakia, Brazil, India and China. Ultimately, the net workforce reduction will end up at 650 positions, or about 2 percent of the company's global workforce.

Sponsored post

To cover the cutbacks, Lenovo is taking a pre-tax restructuring charge of $50 million to $60 million, most of which will be taken in its fiscal first quarter ending June 30.

A Lenovo spokesman said the cutbacks won't impact channel partners. "Our face-to-face [channel] coverage has grown. That remains in place," he said. "We are absolutely committed to our business partners."

Lenovo partners, however, said they have seen a deterioration in their ThinkPad business since China-based Lenovo Group acquired the IBM Thinkpad notebook and PC business two years ago for $1.75 billion.

Bob Venero, president and CEO Of FutureTech, a $70 million solution provider based in Holbrook, N.Y., that at one time had a ThinkPad ThinkVantage Technologies Centre, said he has seen over the last year as much as an 18 percent share shift from Lenovo to other vendors, including Hewlett-Packard.

"I think there is a coverage model challenge for Lenovo based on the way they are handling partners," he said, noting it appears the company is moving to an inside rep coverage model for less active VARs.

What's more, Venero said he has experienced several cases of channel conflict over the last several months. In one case last week, he said, a Lenovo direct-sales rep told a customer that partners could not match the prices offered directly from the vendor.

"We are definitely seeing channel conflict," Venero said, adding that he has escalated his complaint to Lenovo Vice President of Worldwide and Americas Channels Stephen Mungall.

"Lenovo definitely has some challenges," Venero said. "I think over time they will figure it out, and it will be resolved. I hope so, because the ThinkPad is still a great product and there are not a lot of strong notebook players out there." Venero said he had not heard from anyone directly at Lenovo regarding the cutbacks.

Another Lenovo partner, who did not want to be identified, said there has been a noticeable decline in solution provider communication over the last year.

"They are stretching their people so thin that you never see a rep anymore," the solution provider said. "HP is absolutely cleaning their clock."

However, Jay Tipton, vice president of Technology Specialists, a Fort Wayne, Ind., Lenovo partner, said his Lenovo product sales are up 10 percent this year. He said he does not expect the cutbacks to affect his business.

"It's still a great product," Tipton said, applauding the vendor's break-fix support program for solution providers. "The great thing about Lenovo is I don't have to tell a client to call an 800-number to get a system fixed. We do that ourselves with Lenovo's support."