Data center News
Lenovo Cuts Costs In Face Of COVID-19 Pandemic
Joseph F. Kovar
‘Lenovo is caught between an rock and a hard space, sitting as it does between Hewlett Packard Enterprise and Dell Technologies. It's good to have third and fourth companies in a market. But it's hard to compete when the two leaders are so huge,’ says Michael Goldstein, president of LAN Infotech.
Lenovo is implementing cost-cutting measures days after reporting that its profits and sales were being impacted by the COVID-19 coronavirus pandemic.
A Lenovo spokesperson confirmed the cost-cutting measures via email, although the company didn’t disclose any specifics.
"Like every business today, we are continually managing our cost structure to ensure long-term competitiveness, including undertaking targeted expense saving actions in certain areas," the spokesperson wrote.
The China-based data center and mobile device giant last week reported that its fourth fiscal quarter 2020 worldwide revenue fell 10 percent year-over-year to $10.6 billion, while net income fell 64 percent to $43 million.
The drop in fourth fiscal quarter year-over-year revenue included a 47 percent decline in Lenovo's Mobile Business Group (MBG), a 4 percent decline in its PC and Smart Devices (PCSD) business, and a 3 percent fall in its Data Center Group (DSG) business, the company reported.
Lenovo blamed much of the shortfall on the COVID-19 coronavirus pandemic, which disrupted production in its Wuhan, China-based facilities.
Among the cost-cutting measures Lenovo could employ are job cuts. However, the spokesperson declined to discuss whether Lenovo layoffs are a part of the measures.
Lenovo held a round of layoffs in May of 2019 that meant the departure of 500 employees.
Solution providers are not surprised to see cost-cutting measures impacting Lenovo, particularly given Lenovo's customer base which extends from small businesses to enterprises.
John Woodall, vice president of engineering west at General Datatech, a Dallas-based solution provider, said companies like Lenovo are likely negatively impacted by the COVID-19 coronavirus pandemic.
"The economic stimulus money has mostly been spent, which is bad news for businesses impacted by the pandemic," Woodall told CRN. "A lot of small businesses are not coming back. And a lot of companies are going through digitization as a result."
The number of jobs coming back as the pandemic eases will be much smaller than the number of jobs lost, Woodall said.
"Every company is going to look at cost-cutting, and that relates to employment and data center real estate," he said. "Some companies are going even farther and maybe getting out of their own data centers and moving to co-location. Pure play data centers are definitely under pressure. And companies like Lenovo which are heavily into the data center infrastructure business will be impacted."
Michael Goldstein, president of LAN Infotech, a Ft. Lauderdale, Fla.-based solution provider and Lenovo channel partner, said that while many companies are facing hard times because of the pandemic, Lenovo is in a tough position.
"Lenovo is caught between an rock and a hard space, sitting as it does between Hewlett Packard Enterprise and Dell Technologies," Goldstein told CRN. "It's good to have third and fourth companies in a market. But it's hard to compete when the two leaders are so huge. Lenovo is a really channel-friendly vendor. But it's a tough battle."