ghest level in three weeks after the company said it plans to cut 1,400 jobs, or about 5 percent of its workforce. The stock rose 2.1 percent to HK$2.92 at the midday break in Hong Kong, after gaining as much as 3.2 percent, and was headed for its highest close since March 27. The company will employ 750 people in markets such as China and India, Lenovo said.
The job cuts, Lenovo's second since it bought International Business Machines Corp's PC unit in 2005, will help the Raleigh, North Carolina-based company boost profitability, which trails larger rivals Hewlett-Packard Co. and Dell Inc. Lenovo's gross margin, or the percentage of sales left after deducting production costs, is half that of market-leader Hewlett-Packard's.
"Lenovo's job cuts will make the company more compact and integrated and will also boost its margins," Randy Zhou, an analyst with Bank of China International in Shanghai, said Friday by telephone. He rates the shares "outperform."
Lenovo said it expects to save $100 million in the year ending March 31, 2008, from the job cuts. The employee reductions will cost between $50 million and $60 million before taxes, with most being recorded in the quarter ending June 30, Lenovo said.
The reorganization will make the company more competitive, Chief Executive William Amelio said Thursday in a conference call. "Lenovo's cost structure outside of China is not in line with the industry benchmarks," he said.
