The struggles in the PC market continue to impact the entire electronics value chain as Lenovo Group Ltd. announced it will reduce its workforce by 5%, or about 3,200 people.
After a weak second quarter marred by slower PC sales and struggling inventory issues with its Motorola assets, Lenovo CEO Yuanqing Yang says it “must be proactive and decisive” in order to “deliver profitable, sustainable growth and achieve our long-term goals.” The reduction in workforce is part of a larger effort by the world’s largest PC OEM to reduce expenses by about $650 million in the second half of 2015.
The 2015 PC market begins in a bad shape with a first quarter sequential decline of 11.2% and an annual decline of 4.8%, according to IHS (Read: PCs Off to a Slow Start in 2015). Intel, Texas Instruments and other chip vendors blamed the poor efforts in the first quarter on the weak PC market. Intel went so far as to say it expects a mid-single digit percentage decline in PC sales for the entire 2015 year.
The move by Lenovo to cut costs is the latest indication that the inventory correction as a result of the Windows XP retirement, OEMs waiting on Windows 10 and a new microprocessor launch, Skylake, from Intel are causing substantial problems for the PC value chain.
The cuts from Lenovo, while across the board, appear to have a heavy emphasis on its Motorola assets as it tries to better align that technology with its core businesses.
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