Lenovo cuts jobs, restructures

By Donny Kwok

HONG KONG (Reuters) - Lenovo Group, the world's fourth-biggest PC maker, forecast a quarterly loss as China's slowing economy hit sales, and said it will axe 2,500 jobs as part of a restructuring to cope with falling demand for computers.

Shares in the company, which bought IBM's PC business for $1.25 billion in 2005 to put the Chinese brand on the global stage, slumped by more than a quarter, their biggest fall in 11 years.

"Lousy quarterly earnings were widely expected, especially from its major markets overseas, but a faster-than-expected slowdown in the Chinese economy worries investors," said Conita Hung, head of equity research at Delta Asia Financial.

"The market had initially expected the China market to offset part of its bad performance overseas."

Lenovo noted that weaker global demand by businesses for personal computers also dented sales as economic slowdown bites.

"Although the integration of the IBM PC business for the past three years was a success, our last quarter's performance did not meet our expectations," Chairman Yang Yuanqing said in a statement.

The company said it would consolidate its China and Asia Pacific organizations into a single Asia Pacific and Russia (APR) business unit, and will cut executive compensation, including merit pay and long-term incentives, by 30-50 percent.

Shares in Lenovo, ended 26 percent lower to close at HK$1.91 on Thursday after being suspended a day earlier.