Lenovo is the latest major PC company to feel the heat from a shrinking PC market. The biggest computer manufacturer is planning to cut jobs after seeing its net profits fall for the first time in almost three years, the Financial Times reports.
The number of jobs the company intends to cut wasn't mentioned.
According to Lenovo's fiscal year Q3 report (PDF), "revenue declined by 24 percent year-on-year to US$15.3 billion."
The company's biggest issue is its Intelligent Devices Group (IDG), which includes computers, smartphones, tablets and other hardware. Revenue dropped by 34% and operating profit fell by 37% year-on-year, respectively. The company's report states that PC sector shipments "regressed to pre-COVID levels" while there was still too much product in the channel, though Lenovo claims IDG still maintained its leadership in market share.
On a conference call with investors, Lenovo CEO Yang Yuanqing and chief financial officer Wong Wai Ming said that the company needs to cut $150 million in costs, which "includes overall reduction in operational spending as well as workforce adjustments where necessary and appropriate," the Register reports.
If Lenovo moves ahead with layoffs, it wouldn't be the first in the space. Dell recently announced 6,650 cuts, and HP said it would drop between 4,000 and 6,000 employees over the next three years. In addition, many other tech industry companies have had layoffs, including Microsoft, Meta, Alphabet, Coinbase, Amazon and Salesforce.
Lenovo does have some optimism in its results. It says that IDG is still a market leader and the company still has plenty of cash. Lenovo also claims that "the market might stabilize sooner than many expected in 2023," though the company doesn't cite reasons to believe that will happen.
In December, analysts at Canalys published a report highlighting a 12% decline in PC shipments in the US in Q3 of 2022. Only Apple and Acer saw annual growth in the US, while Dell, HP, Lenovo and others all fell. If you include tablets, Apple was the number one PC vendor in the country (without it, that honor went to Dell at the time).
"Looking ahead, the US PC market will face further headwinds," Canalys analyst Brian Lynch said in the report. "Despite the Q4 holiday season, the market will suffer a continued downturn. Cash-strapped consumers will cut spending on expensive technology products. Retailers have ramped up promotions in recent months to make room for new device launches as the holiday season approaches. But overall retail inventories are still growing faster than sales. The education segment will begin a slow recovery in 2023, but the bulk of device refreshes are now likely to occur in 2024."
Meanwhile, Lenovo and its competitors are still producing new devices, having updated a large swath of their lineups at CES 2023. Despite inflation, fears of a recession and the fact that many people bought new computers in the last few years, all major PC manufacturers face a tough road ahead as they navigate a path back into people's wallets.
Here’s wishing good luck to everybody who might be getting laid off
Yeah, currently everything is all bleak and cloudy - but there's going to be one heck of a boom a few years in the future. It takes a while to get a high-skilled tech employee up to speed. If you wait until the boom happens to hire a bunch of new people, then you're going to have a bunch of quality issues at the same time you're trying to ramp like crazy. Not a good combination.
If you bite the bullet now and keep paying your currently highly trained and highly skilled workers, you'll be able to rapidly pump out a goldmine later down the line when you need them the most. Everyone else's factories will be full of clueless noobies and the few old dogs that know how the place works will be tied up training said noobies while you're humming along at 110% efficiency.
Hiring contractors all the time is a sure way to lower your product quality. I've seen it time and time again. Only a few skilled full time employees left who are stuck in their ways and not modern at all. And then they bring in contractors for a product feature surge. These contractors do not care about quality. They care about how much they can bill you for. They try to get away with just meeting AC to get paid without caring about side effects of their code. They will just make it a follow-up ticket to fix a deficiency they can get paid for. Well if they did it right in the first place, that wouldn't be an issue.
But the data suggest it's going that companies are dropping full time employees as they try to control CapEx. (Full time employee cost). Contractors come at them with the pitch "hey we can save you money. You can fire us anytime you want and you don't have to pay benefits.". Then the contractor comes after programmers going "we'll pay you more per hour than your old job". First off that's a lie. They are paying you less once you count benefits. And they are skimming 20% and 40% off the top for themselves. It's a sweet deal for them. Not the workers. And truth is most of these contractors firms go for overseas help first till they run out H1B visas. Then they come to you and offer the same job for the same pay. I had many try to pawn off $50/hour with no benefits as great pay...and I would have to pay for a second place to live. I made $75/hour + benefits. When I tell them this I get the same broken English "are you sure you can't accept $50?". I say "Maybe that's great pay where you live. But that isn't going rate here." And I hang up and put them on my spam list.
When a company institutes a policy you agree with, you've got to vote with your wallet.
It's just too bad I'm nowhere close to buying another laptop, right now. Not that mine is exactly recent, but rather that I just don't really need a personal machine on the go, lately, and it's adequate if/when I do.