Lenovo, a global technology company, is reportedly starting to lay off employees as its PC business continues to suffer from the economic downturn. As per a report in CRN, the layoffs at Lenovo are “essential for a generally $115 million expense-cutting arrangement”. Lenovo President Yang Yuanqing informed in February about a coming “labor force change” as part of a broader reduction in spending. The company had approximately 75,000 workers at the end of its 2022 financial year.
Reasons for the Layoffs and market slump
A “severe slump” in the PC and smartphone markets caused the company’s revenue to drop 24% (year-on-year) to $15.3 billion and net income to $437 million in the quarter that ended December 31. The downturn was attributed to a “confluence of global economic challenges and dynamic shifts in market demand,” according to Lenovo CFO Wong Wai Ming. According to the International Data Corporation (IDC), global shipments of traditional PCs in the March quarter (Q1 2023) were 56.9 million, a massive 29% decrease from the same quarter last year. This was caused by weak demand, excess inventory, and a worsening macroeconomic climate.
Lenovo’s market share
Lenovo held a 22.4 percent market share of the global PC market, followed by HP Inc. with 21.1 percent and Dell Technologies with 16.7 percent, according to the International Data Corporation (IDC). While Lenovo dominates the global PC market, the recession in key markets could make recovery difficult if it continues into the following year.
Lenovo’s cost-cutting plan
The layoffs are part of Lenovo’s cost-cutting plan, which aims to reduce operational expenses and make workforce adjustments where necessary and appropriate. A statement from company spokesperson said, “We continue to invest in the areas that accelerate growth and the overall transformation of the company.” The spokesperson added, “As our CEO Yuanqing Yang said at our most recent quarterly earnings announcement, we are reducing operational expenses and making workforce adjustments where necessary and appropriate.”
The future for Lenovo
As the downturn continues, the respite in growth and demand is also giving the supply chain space to make changes as many factories explore production options outside of China. It remains to be seen if Lenovo’s cost-cutting measures will help it weather the economic storm, or if the company will need to make further adjustments to stay afloat.
