HONG KONG, Jan 8, 2009 (AFP) - Chinese computer giant Lenovo announced Thursday it would cut about 2,500 jobs, roughly 11 percent of its worldwide workforce, after suffering losses due to the global economic crisis.
The company, the world's fourth-biggest personal computer maker, said in a statement that the "resource redeployment plan" would help save 300 million US dollars in the financial year ending March 31, 2010.
"The company expects to reduce the number of its employees worldwide by 2,500 during the first quarter of 2009, approximately 11 percent of its total workforce," it said, adding that the cuts would include management and executive positions.
Lenovo's Hong Kong-listed shares plunged 26 percent to close at 1.91 Hong Kong dollars (24.5 US cents) Thursday, after trading in its stock was suspended Wednesday pending the release of the profit warning.
Ample Finance Group's Alex Wong forecast a bleak outlook for Lenovo and predicted the company would underperform in 2009. "This is one stock I won't buy," he told Dow Jones Newswires.
Lenovo said in November last year that its net profit for the three months ending September 30 slumped 78 percent from a year earlier to 23.4 million dollars. The firm has seen double-digit growth in profits until then.
That followed the company's report of a surge of more than 200 percent in the 2007-8 financial year, citing strong sales growth across the world.
Yang Yuanqing, Lenovo's board chairman, said in the statement: "Although the integration of the IBM PC business for the past three years was a success, our last quarter's performance did not meet our expectations."
"We are taking these actions now to ensure that in the uncertain economy, our business operates as efficiently and effectively as possible, and continues to grow in the future."
Lenovo came to worldwide prominence when it bought IBM's personal computer unit in 2005.
The company said in a separate statement sent to the Hong Kong stock exchange Thursday that preliminary estimates showed it would make a loss in the final three months of 2008.
It said it believed the potential loss is a result of slowing demand for personal computer and related products amid unprecedented global economic challenges.
Although Lenovo said it had seen reduced demand around the world it specifically identified problems in China.
"The slowing down in the Chinese economy... has also affected what has historically been a major market for the group," it said.
The company said it will also merge its operations in China, Asia Pacific, and Russia to increase efficiency. The new unit will be headed by Chen Shaopeng, currently senior vice president of Lenovo, and president of the firm's Greater China division.
It also announced that Scott DiValerio, who headed the sales organisation for Americas, will be leaving and replaced by Rory Read, senior vice president of operations, as part of its streamlining effort.
Executive compensation, including merit pay and long-term incentives, will be cut by between 30 percent and 50 percent, the group said.
Its president and chief executive officer, William Amelio, said in 2008 that Lenovo would continue to target new markets.
The company tried in 2007 to buy European personal computer maker Packard Bell, but was thwarted by a stronger bid from Taiwanese rival Acer.