Lenovo to Lay Off 1,000
Pressures in desktop business prompt move.
Ben Ames, IDG News Service
In response to market pressures in its desktop business, Lenovo today announced it would lay off 1,000 employees and move its corporate headquarters from Purchase, New York, to Raleigh, North Carolina.
In a conference call with reporters, Lenovo President William J. Amelio said that Lenovo's notebook business is strong in developing and emerging markets, but that its desktop business faces severe competitive pressures.
"Lenovo leads the market in innovation. But we still have inefficiencies. We need to bring our expense-to-revenue ratio closer to industry benchmarks, and simplify our organizational structure," Amelio said.
The changes make sense in terms of the competitive PC market, analysts said.
"Business desktops are a narrow, narrow margin business; they are almost a commodity. You have to be very efficient in order to make money selling desktops," said Gordon Haff, senior analyst with research company Illuminata.
Moving to ThinkPad HQ
The challenges in merging the two companies also help explain Lenovo's decision to move its headquarters.
"The ThinkPad group has always been located at IBM's Raleigh offices. I'm not sure what their reasoning was in the first place to have a small headquarters of 70 or so people, remote from everything else in the company," Haff said.
Lenovo Chairman Yang Yuanqing also cited integration challenges during a largely downbeat address he made to IBM's partners at the PartnerWorld conference in Las Vegas yesterday.
Yang commented that Lenovo's international business has only recently begun to turn a profit. He called for further integration of IBM's PC business within his company and for a transformation to "the new Lenovo."
One way he plans to achieve that vision is to diversify Lenovo's product offerings in the U.S. over the long term.
Yang stressed that Lenovo's core international focus for the next two years will be its PC business, with an emphasis on the small to midsize business (SMB) market, which the vendor recently entered along with plans to introduce consumer PCs later this year.
AAmelio cited the company's February launch of its Lenovo 3000 line of laptops and desktops as evidence the company is moving toward its goal of profitable growth.
The 3000 series is a family of low-cost PCs featuring a $349 desktop PC and a $599 laptop. Lenovo hopes to steal market share in the U.S. SMB segment now dominated by Dell and Hewlett-Packard.
China Martens of IDG News Service contributed to this report.
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