Lenovo plans to cut 3,200 jobs
Less than a year after buying Motorola Mobility, China’s Lenovo has said that it will cut 3,200 jobs on the heels of a steep drop in sales of Motorola phones. Lenovo said that most of the cuts will be related to the integration of Motorola Mobility with Lenovo’s legacy smartphone business. About 500 jobs will be cut at Motorola Mobility’s Chicago headquarters.
Motorola Mobility moved into downtown Chicago three years ago in a move that Crain’s Chicago Business called “the largest single employment influx for the city in many decades.” The move came just a few months after Google bought Motorola Mobility for $12.5 billion.
The three years that Motorola Mobility spent as a Google unit were great years for Apple and Samsung, but not such good ones for other smartphone makers. Google itself turned to Korea’s LG to manufacture its Nexus line of smartphones, and eventually sold Motorola Mobility to Lenovo for a fraction of the purchase price. But Google held onto Motorola Mobility’s crown jewel – its patents.
Now many of the people who won those patents may be looking for new jobs. Lenovo said it will cut 3,200 nonmanufacturing jobs and take a one-time charge of $600 million. Lenovo expects the cuts to yield annual cost savings of $1.35 billion companywide and $850 million for its mobile phone unit.
Lenovo said that the 3,200 jobs represent 5% of its total headcount and 10% of its nonmanufacturing workforce. While its mobile unit lost almost $300 million during the most recent quarter, mobile is not Lenovo’s primary business. The company still relies on personal computer sales for the bulk of its revenue.
Lenovo’s news broke on the same day that Taiwanese smartphone maker HTC said it will cut more than 2,000 jobs, or 15% of its workforce.
Weakness in the Chinese economy is depressing sales for companies that sell to consumers in the world’s most populous country. Lenovo also faces tough competition from Xiaomi, which has taken the smartphone market by storm in China. Xiaomi has said it expects $16 billion in revenue this year, but does not disclose its income.
Lenovo CEO Yang Yuanqing told Reuters that he is not giving up on mobile. He said that he remains determined to make Lenovo a true competitor to Apple and Samsung, and that the Motorola Mobility acquisition was a good decision.
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