Lenovo has announced plans to cut 3,200 jobs from its 60,000-strong workforce after reporting a huge drop in profits.
The company said that revenues for its first quarter of 2015 were $10.7bn, a three percent increase year over year, but profits fell by 51 percent to just $105m.
Lenovo blamed the drop on several factors, including declines in demand for PCs and tablets and major challenges from new players in markets such as China in the smartphone and tablet markets.
As a result, Lenovo will make hefty job cuts in non-manufacturing roles, which make up half its workforce.
Lenovo said that the cuts will reduce expenses by $650m for the second half of 2015 and $1.35bn on an annual basis. However, the cuts will cost $600m, negating most of the savings for 2015.
The firm will also restructure its Mobile Business Group to “better leverage the complementary strengths of Lenovo and Motorola” and reduce the number of products.
Lenovo explained that the Motorola unit will lead the design, development and manufacturing of smartphone products, suggesting that many of the job losses may come from the Lenovo phone division.
Chief executive Yuanqing Yang said that the tough measures are necessary to ensure the company's prosperity in the future.
"To build long-term, sustainable growth, we must take proactive and decisive actions in every part of the businesses,” he said in an email to employees.
"We will act with logic and respect, speed and precision, clarity and consistency as we make these changes. When we emerge from this effort, we will be a faster, stronger, better integrated and aligned global company."
The performance of Lenovo’s various business units was revealed in the earnings release, giving an insight into how the firm is faring in various sectors.
Lenovo’s PC group saw sales of $7.3bn, the bulk of the firm's revenues, although it turned a profit of just $368m, a decline of eight percent year on year, while shipments fell 7.1 percent to 13.5 million.
The mobile group, which now includes Motorola figures, saw sales up 33 percent to $2.1bn, with Motorola contributing more than half of revenues at $1.2bn.
This was generated from shipments of 16.2 million smartphones in the quarter, 5.9 million of which were from Motorola. However, this was a sizeable 31 percent decline year over year. Despite the revenue growth, the mobile division reported a loss of $292m for the quarter.
Meanwhile, sales in the Enterprise Business Group (EBG), which includes servers, storage, software and services, were $1.1bn, a six-fold improvement on the same period last year. However, despite this growth, the unit actually cost the company $40m.
Lenovo said that it hopes EBG will become a major unit for the firm, delivering $5bn in revenue with good margins for the longer-term future.
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