Device maker Lenovo today announced layoffs for 3,200 of its employees, or 5 percent of its workforce, and plans to adjust its operating structure and product line to make the most of its acquisition of Motorola Mobility last year. As a result, Lenovo will have to pay $600 million in restructuring costs and will be clearing around $300 million worth of smartphone inventory.
The cuts are intended to reduce expenses by around $650 million in the second half of this year and around $1.35 billion annually, Lenovo chairman and chief executive Yang Yuanqing wrote in a letter to employees today, following the Chinese company’s earnings release for the quarter that ended on June 30.
The company will restructure its Mobile Business Group, in particular.
“We will have a much simpler, more streamlined product portfolio with a reduced number of clearly differentiated models,” Yuanqing wrote. “To create a faster, leaner business model, we will leverage our global sales force across Lenovo and we will accelerate the work already well underway to maximize efficiency in our global supply chain.”
The mobile business group will look to Motorola to handle smartphone design, development, and manufacturing, according to the earnings statement.
Lenovo will also cut costs in its core PC business in the quest for greater profitability, Yuanqing wrote. The company reported net income of $105 million on $10.7 billion in revenue for the quarter.
Lenovo’s Enterprise Business Group, which includes the x86 server business that Lenovo bought from IBM in 2014 for $2.3 billion, will be repositioned and become more cost-competitive, Yuanqing wrote.