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Lenovo cuts 11% of workforce, reduces executive pay by up to 50%

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Lenovo cuts 11% of workforce, reduces executive pay by up to 50%

Beijing (China) – In Thursday trading, Lenovo’s share plunged 26% as the world’s fourth larges PC maker said it will eliminate 11% of its workforce, about 2500 jobs worldwide, and will reduce executive pay by 30% to 50%. Lenovo cites the global economic recession and the resulting loss of corporate customers.

In the previous quarter (ending September 30, 2008), Lenovo announced its profits were down 78%. The company expects to post a loss this quarter – though has not yet released final financial details. This quarter’s loss will includes a one-time $150 million charge.

Lenovo reports being hit particularly hard in corporate accounts, which are up to 70% of the company’s sales.

As previously announced, the company is also consolidating its Asia-Pacific and China operations into a single business unit, claiming it will eliminate duplication and cut expenses.

Lenovo’s CEO, William J. Amelio, said via a statement, “As hard as this news is for all of our Lenovo employees, we believe the steps we are taking today are necessary for Lenovo to compete in today’s economy.”

J.P. Morgan analyst Charles Guo agrees with Amelio, saying “This is something they have to do. If they don’t do it, the company will have a huge loss. We believed they had to do something drastic. This 11 percent is within our expectations.”

The news was announced early today in Beijing. At this time, China has already completed Thursday’s business day. Lenovo’s Chen Shaopeng, president for the Greater China division, had warned last Friday “The economic conditions are so tough that (the company) is set to take some measures to counter the winter.”