PC maker Lenovo will lay off 10 per cent of white-collar staff after sales of mobile phones at recent acquisition Motorola fell by a third.
The Chinese company said it plans to cut about 3,200 non-manufacturing jobs with a one-time cost of $600m (£384m) after it reported that its quarterly net profit was halved as its mobile division lost nearly $300m.
Lenovo bought Motorola from Google for $2.91bn last year betting that the money-losing brand would help it become a global smartphone leader, but the business shipped just 5.9 million handsets in the quarter, a 31 per cent decline from a year earlier.
"I still believe mobile is a new business we must win," chief executive Yang Yuanqing told Reuters in an interview. "I still believe this acquisition (Motorola) was the right decision...Except Apple and Samsung there is no third strong (global) player. I believe that will be Lenovo."
However, the boss of the world's largest PC maker warned that the difficulty in selling handsets, combined with a continuously shrinking global market for PCs, meant the firm was facing its "toughest market environment in recent years".
Yang cited poor mobile sales in Brazil and China, saying Lenovo would prioritise marketing smartphones outside its home turf, where market saturation and price wars have hobbled firms.
Shares in Lenovo slid nearly 9 per cent today, but the Beijing-based firm said the restructuring would yield savings of about $1.35bn on an annual basis going forward.
"The market was worried about a slowdown at Motorola and the China market share decline, and then they reported the investors' worst fears," said Nomura analyst Leping Huang, but he added that the stock drop could have been worse. "It's quite positive they can move so quickly to announce cost reductions and inventory writeoffs."