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Lenovo to cut 2,500 jobs, merge regional operations
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China's Lenovo, the world's fourth largest personal computer maker, is to cut 2,500 jobs, about 11 percent of its global workforce, said a company statement posted on the Hong Kong stock exchange website today.

The statement did not say which of its international operations would see job cuts, but a company spokesman said the China operations would be unaffected.

"Although in the past three years, we successfully integrated the IBM personal computer business, the performance in the last quarter didn't reach our expectations," board chairman Yang Yuanqing said in a separate statement Thursday.

He said the measures would help ensure the company's operations grew efficiently in the "present unclear economic environment".

The company would merge its Asia Pacific operations with its greater China and Russia operations, with Chen Shaopeng, president for greater China and Russia, as head of the new division.

However, a Lenovo spokesman declined to give any further details of the merger.

Management and executive positions were among the posts to be cut, the company said Thursday.

It also planned to cut executive salaries and performance-based payments by 30 to 50 percent.

The company said the plan would help save US$300 million in the financial year ending March 31.

Weak performance and "potentially huge losses" forced the company to restructure in the fourth quarter of 2008, according to the statement.

Under the restructuring plan, Lenovo will also close its Toronto-based customer service center and move its operations to its Morrisville center in North Carolina, in the United States

"The current restructuring, the largest since the 2005 Lenovo-IBM PC deal, cannot be underestimated in importance because it involves the company's greater China operations," said Guo Haitao, a veteran IT business consultant.

About 60 percent of Lenovo's revenue come from the China market, he said.

Ye Lei, chief hardware analyst with the US market research house Gartner, said that according to Lenovo's statement, the layoffs would probably be within the Asia Pacific operations.

"With the merger, Lenovo's greater China team, with a strong lineup, is expected to help boost the Asia Pacific business," he added.

Lenovo suspended trading on the Hong Kong stock market Wednesday amid speculation of an imminent restructuring.

Trading resumed Thursday when Lenovo's stock fell 20 percent in the morning session. The price-earnings ratio is 4.5, which is within the normal range.

Analysts with the Beijing-based Guodu Securities said the fall reflected the expected losses in its third financial quarter.

Lenovo said in its statement to the Hong Kong stock exchange it expected a loss in the final three months of 2008.

Analysts also said the influence of the restructuring on Lenovo stock was limited because it would not change the overall picture and competitive landscape of the IT business.

(Xinhua News Agency January 8, 2009)

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