Lenovo has approved a preliminary plan to slash more than 1,000 jobs to cut costs as price competition in the PC market remains intense, a source close to the company said.
The job cuts would fall mostly in the United States--the majority would be layoffs, while some workers would be redeployed. But some of the restructuring would also take place in China, the source said.
A representative of Lenovo, the world's No. 3 PC maker, would not confirm or deny the comments. The move would cost between $50 million and $75 million in what is known as a one-off write-off, the source said.
Lenovo hopes the plan will save it between $150 million and $175 million annually in a move that comes about a year after a similar plan to lay off 1,000 workers was announced.
Last March, the company said it would cut about 5 percent of its work force to slash costs in an effort to reshape the PC unit it bought from IBM. The new plan indicates the company did not achieve the cost savings that it had originally anticipated, the source said.
Lenovo, China's largest PC maker, has said last year's layoffs were part of a six- to 12-month plan to save $250 million annually in costs, following its $1.25 billion purchase of the IBM PC business in May 2005.
The Chinese company is stepping up competition with market leaders Dell and Hewlett-Packard.
Lenovo posted a 23 percent gain in profits in the December quarter, its best showing since it bought IBM's loss-making PC arm, as it held costs down. However, revenues were flat, indicating the company was not making inroads into key markets such the United States and Japan, where shipments declined.
Lenovo has competed aggressively on price with rivals, but any gains in market share have been eroded by falling unit prices, say analysts. Lenovo had hoped the purchase of the struggling IBM unit would bring in the notebook computer technology it needed to compete in the highly competitive sector. However, the company has not been able to convince enough corporate clients that the new Thinkpad notebooks were still IBM computers and not just Lenovos with a new logo attached, the source said.