Lenovo said it will eliminate about 2,500 jobs worldwide, including some management positions. It said executive compensation would be cut by 30 to 50 percent.
"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," Chief Executive William J. Amelio said in a statement.
Lenovo shares plunged in Hong Kong, plunged 26 percent to 1.91 Hong Kong dollars (24.6 U.S. cents).
Beijing-based Lenovo's quarterly profit shrank 78 percent for the three months ended Sept. 30. The company warned at that time of possible job cuts.
"This is something they have to do. If they don't do it, the company will have a huge loss," said J.P. Morgan & Co. analyst Charles Guo. "We believed they had to do something drastic. This 11 percent is within our expectations."
Lenovo has been hit especially hard by global turmoil because corporate customers that account for 60 to 70 percent of sales are slashing spending, Guo said.
"Overall, it will be quite difficult for Lenovo in the next nine to 12 months," he said.
Lenovo said it expects to save about $300 million in the fiscal year ending March 31, 2010, due to its restructuring. But it said it anticipates it a pretax charge of about $150 million, the bulk of which will be taken in its fiscal fourth quarter. The company said it expects to report a loss for the three months ending Dec. 31.
In addition, Lenovo said it is consolidating its Asia-Pacific and China operations into a single business unit. The company said the restructuring will eliminate duplication and cut expenses.
Lenovo acquired IBM Corp.'s PC unit in 2005. The company said earlier it successfully integrated the unit with its other operations. But analysts said it might suffer lingering problems because the IBM unit's costs and staff might still be too large.
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