Chinese electronics maker Lenovo Group Ltd. said it would cut
10% of its nonmanufacturing positions after reporting net profit
was down 50.9% for the quarter ended in June, as the global
personal-computer market continues to contract and China's
smartphone market grows saturated.
Lenovo, the world's largest PC maker by shipments, is grappling
this year with the integration of two major acquisitions—smartphone
maker Motorola Mobility and IBM's x86 server unit—against
challenging market conditions.
The company said it would reduce its nonmanufacturing workforce
by 3,200 as part of $650 million cost-cutting effort in the second
half of the fiscal year.
"We will reduce costs in our PC business and increase efficiency
in order to leverage industry consolidation increase share and
improve profitability," said Lenovo Chief Executive Yang Yuanqing
in a statement.
Lenovo booked net profit of $105 million for its fiscal first
quarter, down from $214 million in the year-earlier quarter.
Analysts had expected net profit of $86.7 million. Revenue for the
period was $10.7 billion, up from $10.4 billion a year ago.
Analysts have been bearish about the near-term performance
outlook for Lenovo, given macroeconomic trends. The global PC
market contracted 11.8% in the second quarter, while the Chinese
smartphone market has become saturated, shrinking in the first
quarter for the first time in six years, according to market
research firm IDC.
"Given weaker positions for both Lenovo and Motorola in a highly
competitive market with slowing growth, we see limited opportunity
for revival," research house Jefferies wrote in an investor note on
August 3.
Lenovo was the fifth-largest smartphone maker globally by
shipments in the second quarter with 4.5% market share, falling
from No. 3 in the first quarter, according to Counterpoint
Research. Two Chinese peers, Huawei Technologies Co. and Xiaomi
Corp., surpassed it in shipments in the quarter.
Lenovo spent a roughly $5 billion last year to buy Motorola's
smartphone business and IBM's low-end server unit.
Write to Eva Dou at eva.dou@wsj.com
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