Lenovo to lay off 1,400 workers

[ryengineer]

Saw this, thought could be worth sharing.

April 21 2007

BOSTON: Number three personal computer maker Lenovo Group Ltd said on Thursday it will lay off 1,400 workers and move jobs to emerging markets to better compete with faster growing rivals such as Hewlett-Packard Co. and Acer Inc.

Lenovo, which leapt onto the world stage in 2005 when it bought IBM's loss-making PC arm for US$1.25 billion (RM4.31 billion), said it would cut a net 650 jobs throughout the world.

An additional 750 positions will be moved to China, India, Brazil and Slovakia - countries with lower labour costs that are close to Lenovo's suppliers and manufacturing operations. China's biggest maker of personal computers said the plan would affect 1,400 workers including contractors.

Lenovo said it is making the changes to cut expenses, bringing its cost structure in line with those of rivals in an industry known for aggressive pricing.

While the company's personal computer sales grew 17 per cent in the first quarter from a year ago, that was slower than some competitors.

Market researcher IDC on Wednesday reported Taiwan's Acer saw first-quarter PC sales surge 41 per cent from a year ago, placing it in a dead heat with Lenovo as the world's No. 3 maker of personal computers. Both companies sold about four million PCs during the first quarter.

Hewlett-Packard's sales rose 28 per cent to 11.2 million machines while Dell Inc's sales fell seven per cent to nine million.

Lenovo currently has about 24,500 employees, including 1,700 in Raleigh, North Carolina, which is the worldwide executive headquarters of the Chinese company. - Reuters

[gator]

I hope they don't move the support operations out of the US

[tockki]

Yikes... saw the news and was a bit disappointed in that 1400 US employees to be axed... and their jobs routed to other countries for cheaper labor... hmmm... cuts to include 20% of the workforce at the Lenovo's Research Triangle Park... Will the T60s line be the end of high quality for Thinkpads??? Looks like the T6xs will be the latest and greatest of all thinkpads.... let's say I'm glad that the cuts came after the creation of T61's... but it looks as though support will be affected too...

[bill bolton]

Will the T60s line be the end of high quality for Thinkpads???

No.

Cheers,

Bill B.

[Techgurl]

I am sure this will be the end of good support. I saw a T-60 widescreen in best buy and it looked more like a Lenovo then a thinkpad.

Looked like some cheap plastic.

I was not impressed. Guess my next laptop will be a Mac

[vinny77]

my brother just got a t60 and I have a t40. I see tremendous lack of quality in the t60 and to me it almost feels cheap in comparison. thats just my opinion.

[berlin]

I am sure this will be the end of good support. I saw a T-60 widescreen in best buy and it looked more like a Lenovo then a thinkpad.

Looked like some cheap plastic.

I was not impressed. Guess my next laptop will be a Mac

no trademark beveled edge either. a thinkpad sticker and black finish doesn't make it a thinkpad.

mine will be a mac too but loaded with vista.

[pianowizard]

my brother just got a t60 and I have a t40. I see tremendous lack of quality in the t60 and to me it almost feels cheap in comparison.

Is that a 15.4" widescreen T60? IMO, the 14.1" 4:3 T60 looks more professional.

[schen]

I am sure this will be the end of good support. I saw a T-60 widescreen in best buy and it looked more like a Lenovo then a thinkpad.

Looked like some cheap plastic.

I was not impressed. Guess my next laptop will be a Mac

no trademark beveled edge either. a thinkpad sticker and black finish doesn't make it a thinkpad.

mine will be a mac too but loaded with vista.

Guys, I agree more since I personally don't care for the changes since the Lenovo take-over, but the bevelled edge didn't come on the scene until the 570/600. Before that, the ThinkPad world was pretty Boxy (see 770, 560 etc.). It is possible that the design folks are turning back to the original bento box concept that the Yamato people started with.

[ryengineer]

Lenovo will cut 20% of its workforce at its Raleigh, NC headquarters

Just to add more to the news.

http://www.dailytech.com/Lenovo+to+Cut+ ... le7029.htm

[snife]

I can't speak for US support but I know EMEA upper level support, which was already devasted in the last batch of redundancies is going to be completed relocated to a low cost country which will have a really bad impact on the support you get.

I work for Lenovo at the moment but will not soon as I fall into the above category (i am not upset about this).

I think its a shame as I still believe that the ThinkPads are the best notebooks on the market (the T60 is better quality than the T40 - i have done lots of testing and I believe this to be fact) but Lenovo as a company is making some really horrible decisions which I fear will make the future of the brand uncertain.

[milstein]

I think its a shame as I still believe that the ThinkPads are the best notebooks on the market (the T60 is better quality than the T40 - i have done lots of testing and I believe this to be fact) but Lenovo as a company is making some really horrible decisions which I fear will make the future of the brand uncertain.

Wow... people hearts are on the shaky side because of this layoff, which also potentially affect the image of their product

Lenovo'd better give some tranquilizing and encouraging promises to the remaining employees, as soon as possible

[ryengineer]

I work for Lenovo at the moment but will not soon as I fall into the above category (i am not upset about this).

Sorry man, that's sad.

[snife]

I work for Lenovo at the moment but will not soon as I fall into the above category (i am not upset about this).

Sorry man, that's sad.

Not for me, i've been trying to get out for a while, its not been the same good place to work since Lenovo took over.

[milstein]

Sorry man, that's sad.

Not for me, i've been trying to get out for a while, its not been the same good place to work since Lenovo took over.

see? what management are they doing there in Lenovo?
Just profit oriented?

[snife]

I think the decisions must be getting made by accountants who can only think as far ahead as the the next financial year.

Cutting costs to remain in profit is not a viable long term solution and the company will eventually get to the point where it can no longer operate effectively as it has been cut too much or transferred to low cost locales where the people do not have the required skills to do the jobs well - i think this stage is imminent for Lenovo with this round of 'restructuring'

It just surprises me that after having done the exact same thing last year which didn't work (although they claim it was a success - profit would have been down if not for a one off incentive from intel and considering a whole new product range was lauched in Lenovo 3000, sales and profit should not be going down), to do the exact same thing again a year later (as soon as was allowed by many country employment considerations) just strikes me as insane.

Lenovo want to be the next Dell so that is how they are trying to operate - low cost, high volume; you cannot compete with Dell in this sector as their ship volumes lead to much higher discounts and a much more efficient operation so they will not take Dells business, they will only risk losing the business they already have as this business model is not what ThinkPad owners (the only valuable brand they have) expect.

Acer has already become the number 3 PC vendor, overtaking Lenovo in the last quarter, that is not the progress a company that had the potential of Lenovo should be making.

[ryengineer]

Lenovo want to be the next Dell so that is how they are trying to operate - low cost, high volume; you cannot compete with Dell in this sector as their ship volumes lead to much higher discounts and a much more efficient operation so they will not take Dells business, they will only risk losing the business they already have as this business model is not what ThinkPad owners (the only valuable brand they have) expect.

You can say that again. I don't think they'll be able to take over Dell like these tactics. Unless, ofcourse if they start making more and more cost efficient products like lenovo 3000.

Achieving "something" out of this whole laying off scenario is very hard for me to understand. They've visible motives but have little or no prospective to that, at all.

[milstein]

I think the decisions must be getting made by accountants who can only think as far ahead as the the next financial year.

Cutting costs to remain in profit is not a viable long term solution and the company will eventually get to the point where it can no longer operate effectively as it has been cut too much or transferred to low cost locales where the people do not have the required skills to do the jobs well - i think this stage is imminent for Lenovo with this round of 'restructuring'

It just surprises me that after having done the exact same thing last year which didn't work (although they claim it was a success - profit would have been down if not for a one off incentive from intel and considering a whole new product range was lauched in Lenovo 3000, sales and profit should not be going down), to do the exact same thing again a year later (as soon as was allowed by many country employment considerations) just strikes me as insane.

Lenovo want to be the next Dell so that is how they are trying to operate - low cost, high volume; you cannot compete with Dell in this sector as their ship volumes lead to much higher discounts and a much more efficient operation so they will not take Dells business, they will only risk losing the business they already have as this business model is not what ThinkPad owners (the only valuable brand they have) expect.

Acer has already become the number 3 PC vendor, overtaking Lenovo in the last quarter, that is not the progress a company that had the potential of Lenovo should be making.

second for your opinion!

[milstein]

After all, it is so wrong for a company that strives to be like Dell to acquire the IBM PC (Thinkpad) division...
Dell has the philosophy of no software and no hardware (produced by other vendors) left behind: in all, they just assemble these parts and produce some machines to earn efficiently

With such a mindset, Lenovo may well just end up killing the brand after acquiring the brand (which comes from the IBM motto "Think")

[wolfman]

I think that would be a mistake. They have serious name recognition issues. I have been paying attention to people in Office Depot, etc when they are looking at the Lenovo laptops and most (all?) folks I've overheard discussing them have *no* idea that are the company now making thinkpads. In the office we have some of the "Lenovo" branded T60's and everyone calls them IBM thinkpads anyway. I'm sure that will fade over time, but they'd be wise to not make the switch too quickly IMHO.

[wackydan]

Profit is not a bad thing. You should all hope that Lenovo finds a way to maintain some kind of reliable quarterly profit as it is the only way to maintain R&D, brand investment, and the human assets they need. They have shown very little profit if at all since they bought the PC division.

What you are witnessing is the ongoing restructuring of the company post purchase of the IBM PC division. There is nothing abnormal about it at all. They've stated since day one that their expense to revenue %'s were way higher than the industry standard.

Take your pick, would you rather Lenovo wither away maintaining the status quo or would you rather they emerge as a healthy, competititive company in the PC industry while still being able to produce a great product like THinkPad?

I'd rather they do what's best for the company, and leave me with a mainstream choice rather than being left with just HP and Dell.

They will grow... just give them a chance.

[snife]

wackydan - i think your missing the point, I am totally in favour of restructuring if it is in the best interest of the company and the thinkpad brand but i mean in the long term, not only the effect it will have on next quarters profits.

The problem with the restructuring the way lenovo have been doing it, is the blanket nature of it and the disregard for what were always the ThinkPads strengths (product design and support). They have decimated support to lower the expense/revenue ratio, the only thing Lenovo care about is the supply chain - all other departments are now seen as a nuisance which only cost the company money.

Even if ThinkPad quality remains (which I believe it has so far under Lenovo), I cannot see many people continuing to purchase if they do not get the support they have been used to and if sales of thinkpads drop, that is what will put the brand in jeopardy; it doesn't matter how much they try and lower the expense if the revenue does not maintain or increase (which it did not as a result of last years restructuring).

Unfortunately, decisions are being made by accountants with only the interest of the shareholders in mind, often the best interest of shareholders (often quick returns) is in conflict with the best interest of the company for the future.

Lenovo needed to capitalise on its strength - the products and support have always been recognised as the best in the industry so to mess with these areas was not an intelligent move, where the changes had to be made was in the number of systems that get shipped out the door (if you've ever ordered a Dell you will know how much easier they are to buy than a ThinkPad).

IMHO if your expense/revenue ratio is not great then you should work on improving revenue, not on reducing expense as that is not a substainable plan of action over any length of time. For the record though, while Lenovos expense/revenue ratio was one of the highest it was not drastically different from HP or Panasonic, it was much higher than Dell and Acer but they were a totally different type of company who shouldn't really have been competition (I know they all sell PCs but Dell/Acer sell the price, not the product).

[anthean]

The number of companies that have successfully shrunk themselves to success is quite small. More often than not, companies cut out essential personnel and functions and only later realize the catastrophic consequences of doing so. Even if done intelligently, it often takes years for the "surgery" to heal.

If Lenovo truly has a long term business plan that allows them to offer better quality products and service with fewer people, well, more power to them. But their shrinkage must truly be driven by a logical plan, not by short term expediencies of the stock market.

I dare Lenovo to prove me wrong. (Go Lenovo !)