Chinese electronics maker Lenovo is set to move forward with layoffs of 10 percent of white collar employees following disappointing sales of Motorola smartphones. Lenovo purchased Motorola from Google in 2014 for nearly $3 billion as part of its plan to become a leader in the smartphone market, but sales of Motorola handsets for the last quarter were down a whopping 31% from last year. Citing weak sales in both China and Brazil, Lenovo’s new priority will be to market its phones outside of China’s currently saturated market.
That move follows rival Chinese smartphone giants Xiaomi and Huawei taking a similar course. Growth in China’s smartphone market is expected to be slower than worldwide market growth for the first time this year, at 2.5% and 11.3%, respectively.
The planned job cuts will eliminate almost 3,200 employees and carry a cost of $600 million, but will eventually yield savings of $1.35 billion per year. The drop in Motorola sales resulted in profits being halved for the quarter, with shares of Lenovo falling nine percent on the news.
Lenovo is currently the world’s largest PC maker but as the global market for PCs declines, Lenovo is shifting its business to mobile devices in order to maintain profitability. The company plans to rival the top two phone manufacturers Samsung and Apple according to CEO Yang Yuanqing, “I still believe this acquisition was the right decision…Except Apple and Samsung there is no third strong player. I believe that will be Lenovo.” Lenovo was able to ship 16.2 million handsets for the quarter, in comparison with Samsung and Apple at 73.2 million and 47.5 million, respectively.
According to analysis by International Data Corporation, the biggest markets for growth in smartphone sales will be India, Indonesia, South Africa, and the Middle East so Lenovo will likely shift there. Beyond the shift in marketing outside of China, Lenovo’s strategy to take the place as the number three smartphone manufacturer is less clear as it faces intense competition from Samsung, HTC, LG, Xiaomi and Huawei.
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