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Lenovo Layoffs Confirmed In Response To PC Downturn: Report

Dylan Martin

The job cuts are happening after Lenovo said in February that a ‘severe downturn’ in the PC and smartphone markets caused its revenue to decline 24 percent year-over-year in its third quarter, which ended in December. Wong Wai Ming, Lenovo’s CFO, blamed a ‘confluence of global economic challenges and dynamic shifts in market demand’ and said it would pursue layoffs as part of a $115 million cost-cutting plan.

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Lenovo reportedly confirmed that it has begun laying off employees as part of a roughly $115 million cost-cutting plan in response to a major downturn in its PC business.

A Lenovo spokesperson provided the confirmation to WRAL TechWire and referred to CEO Yang Yuanqing’s comments in February about a coming “workforce adjustment” as part of a broader reduction in spending. The representative did not say how many employees will be impacted by the job cuts.

[Related: IDC: Apple PC Shipments Take Big Hit, HP Fares Better Than Rivals In Q1]

The company had about 75,000 employees at the end of its 2022 fiscal year.

“Like our CEO Yuanqing Yang said at our most recent quarterly earnings announcement, we are reducing operational expenses and making workforce adjustments where necessary and appropriate. We continue to invest in the areas that accelerate the growth and the overall transformation of the company,” the spokesperson told WRAL.

A Lenovo representative did not respond to a request for comment by press time.

Lenovo Expects PC Market To ‘Stabilize’ Later In 2023

Lenovo’s layoffs are happening after the company, which has dual headquarters in Beijing, China, and Morrisville, N.C., said a “severe downturn” in the PC and smartphone markets caused its revenue to decline 24 percent year-over-year to $15.3 billion in its third quarter, which ended in December.

In its third-quarter earnings call, Wong Wai Ming, Lenovo’s CFO, blamed the downturn on a “confluence of global economic challenges and dynamic shifts in market demand.” This, combined with the IT giant’s hope of doubling its net margin in the next few years, has prompted the company to invest in “high-margin growth engines” and “reduce runway operational expenses” by roughly $115 million.

However, Yang said on the same call that Lenovo believes the PC market could “stabilize sooner than many expect,” with the possibility that PC sales could end up growing at a faster rate compared to 2019, before the COVID-19 pandemic prompted an unprecedented IT spending spree.

“While the PC market still needs some time to digest the inventory to a healthier level, we believe total shipments are likely to stabilize at a higher than pre-pandemic level as early as the second half of this year,” Yang said back in February.

Servers And Services Fuel Growth For Lenovo

While Lenovo’s business unit for PCs and smart devices, the Intelligent Devices Group, saw revenue decline 34.2 percent year-over-year to $11.8 billion in the third quarter, the company’s server and services businesses both saw double-digit growth in the same period.

The Infrastructure Solutions Group, which includes Lenovo’s servers, grew revenue by 48 percent year-over-year to $2.9 billion in the third quarter. Meanwhile, the Solutions and Services Group, which includes Lenovo’s TruScale as-a-service offering, saw sales increase by 23 percent to $1.8 billion.

“Our diversified growth engines are firing up. Our operational resilience is supporting the results. Our healthy liquidity is ensuring the sum needs of the company. And our investment in new IP is building the next wave of our competitive advantages. Because of this, we are confident to deliver sustainable growth and improve profitability,” Yang said two months ago.

Dylan Martin

Dylan Martin is a senior editor at CRN covering the semiconductor, PC, mobile device, and IoT beats. He has distinguished his coverage of the semiconductor industry thanks to insightful interviews with CEOs and top executives; scoops and exclusives about product, strategy and personnel changes; and analyses that dig into the why behind the news.   He can be reached at dmartin@thechannelcompany.com.

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