Chinese tech giant Lenovo is slashing over 3000 jobs in what CEO Yuanqing Yang calls a “tough market environment,” said the company on Thursday. Their Q1 earnings report showed a 51% drop in net income since the same time last year.
The company will cut one out of every 10 white collar jobs, totaling 5% of the company’s staff, in hopes of yielding $1.3 billion USD in savings annually. Lenovo shares fell by over 8% on Thursday following the release of the results showing a $300 million USD loss in its mobile division.
Lenovo acquired Motorola from Google last year, but the company has failed to thrive under its new management, with handset sales dropping by almost a third. Results from their PC division were similarly disappointing, declining by 7% over the last year.
Lenovo is taking a series of steps to combat market challenges, says the company, including a $600 million USD investment to consolidate the management structure between the Lenovo and Motorola smartphone divisions.
HTC, a competitor to Lenovo’s smartphone business, is also making major cuts following poor earnings. The company revealed that it would be seeking to cut operating expenses by 35% following $250 million USD after-tax loss.
It’s been a tough period for Chinese smartphone makers as demand has slowed in the first half of the year. Even market leaders Apple and Xiaomi have missed their estimates in the increasingly competitive landscape. Chinese players are now making a strong play to enter less-crowded emerging markets including India and Brazil.
Lenovo mentioned that currency fluctuations in Latin America had also taken a toll on their revenue, but that their efforts to extend globally had been generally supportive of the overall business.
Last quarter, we faced perhaps the toughest market environment in recent years…” said Yuanqing Yang, CEO and Chairman of Lenovo. “To build long term, sustainable growth, we must take proactive and decisive actions in every part of the business.”
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