Lenovo Announces Actions to Increase Global Operational Efficiency and Competitiveness

RESEARCH TRIANGLE PARK & HONG KONG--(BUSINESS WIRE)--Lenovo today announced a series of measures designed to enhance business performance and accelerate profitable growth.

“To win in the PC industry, our path is very clear,” said William J. Amelio, Lenovo’s president and chief executive officer. “We must deliver the world’s best-engineered PCs, offer our customers an unrivaled ownership experience, and grow faster and more profitably than the rest of the industry. This means we must make our organization more efficient by reducing expenses.”

The company expects to make a resource reduction of approximately 1,400 (including contractors) throughout the Americas, Asia/Pacific and EMEA, or roughly five percent of Lenovo’s global workforce. Of this number, approximately 750 positions will be transitioned into emerging markets closer to Lenovo’s suppliers and manufacturing operations. The net effect is a global workforce reduction of about 650 positions, with most of these changes expected to be completed within one to twelve months.

The company expects to realize savings of approximately US$100 million in the 2007-08 fiscal year (which began on April 1), the majority of which will be reinvested back into the business to support the company’s strategic initiatives. The company anticipates taking a pre-tax restructuring charge of approximately US$50 to $60 million, most of which will be taken in the first fiscal quarter, which ends June 30, 2007.

“There is no doubt we have made strong progress in the past year, but it’s clear we need to further accelerate that progress to be as profitable and cost efficient as the rest of the industry,” said Amelio. “Today’s actions are necessary to enable us to reduce expenses and grow our business.”

These actions are the result of a thorough analysis of both Lenovo’s global operations and current PC market conditions. They will streamline processes and consolidate Lenovo’s expertise across the globe, enabling the company to meet customer needs more efficiently and operate more competitively. The key components of Lenovo’s action plan are as follows:

1. Further strengthen supply chain and capture more efficiencies by streamlining the global supply chain organization and aligning more work closer to supply base;

2. Integrate software testing into Lenovo’s China operations;

3. Further integrate key customer support functions;

4. Streamline Sales and Marketing organizations; and

5. Centralize teams and align multi-national investments and resources.

In Europe, Lenovo will immediately launch the process of consultation with workforce representatives, as appropriate, regarding the plan’s intended efficiency gains and cost structure reductions.

“While these actions are difficult, we believe the 'tipping point' is within reach,” concluded Amelio. “If we can combine optimal cost competitiveness and efficient delivery capabilities with innovative, best-engineered products, we can generate more profitable growth, gain market share, and make further reinvestments into the business, fueling more growth. We are confident that we are doing the right things to make Lenovo an even stronger, more competitive player in the global PC market.”

About Lenovo Group Ltd.

Lenovo (HKSE: 992) (ADR: LNVGY) is dedicated to building the world’s best-engineered personal computers. Lenovo’s business model is built on innovation, operational efficiency and customer satisfaction as well as a focus on investment in emerging markets. Formed by Lenovo Group's acquisition of the former IBM Personal Computing Division, the company develops, manufactures and markets reliable, high-quality, secure, and easy-to-use technology products and services worldwide. Lenovo has major research centers in Yamato, Japan; Beijing, Shanghai and Shenzhen, China; and Raleigh, North Carolina. For more information, see www.lenovo.com.