Lenovo, HTC Slash Jobs As Smartphone Market Shifts - InformationWeek

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Mobile // Mobile Devices
Commentary
8/13/2015
03:15 PM
Larry Loeb
Larry Loeb
Commentary
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Lenovo, HTC Slash Jobs As Smartphone Market Shifts

Facing pressure and competition in the global smartphone market, Lenovo and HTC each announced layoffs as part of different restructuring plans.

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The smartphone business is not going very well for manufacturers, even those associated with low-cost handsets. This week, HTC and Lenovo confirmed they would lay off workers as part of different restructuring plans in the face of slowing handset sales.

Earlier this month, Taiwan-based HTC posted a second-quarter loss of $252 million against revenues of just over $1 billion. HTC sells its own smartphones and also makes handsets for a number of leading US companies, including Google's Nexus One.

However, lower sales in China, coupled with competition from the likes of Apple's iPhone and Samsung, have played havoc with HTC's plans. Although known for lower-end handsets, the company has tried to branch out into the higher-end market -- one that is dominated by the iPhone.

With this as the backdrop, HTC announced Thursday that it will cut 15% of its workforce and slash operating expenses by more than a third. This translates to about 2,250 people cut by the end of this year.

(Image: Images_By_Kenny/iStockphoto)

(Image: Images_By_Kenny/iStockphoto)

HTC management remained publicly optimistic.

"While the current market climate is challenging, I firmly believe the measures we are putting in place to streamline our operations, improve efficiency and focus, and increase our momentum will start to show results over the coming quarters," HTC CEO Cher Wang wrote in a prepared statement released Aug. 13.

Wang was appointed CEO in March of this year, and had previously been served at as chairman of HTC's board of directors.

HTC also said that it continues to invest in new product areas such as virtual reality, where it is working with over a thousand developers on content ahead of the launch of HTC Vive at the end of the year.

There are an equal number of problems at Lenovo, which is facing pressure in the smartphone market, as well as with slow sales of PCs.

The Chinese manufacturer is highly involved in the mobile market, having paid $5 billion for Motorola in 2014.

Lenovo appears to be feeling the hangover from that now.

According to the company's financial results for its fiscal first quarter, Lenovo reported a 51% slump. Net profits for the quarter totaled $105 million compared to the $214 million Lenovo posted during the same quarter last year.

Besides woes in the computer market, company executives noted a "slowing growth and increasing competition -- especially in China -- in smartphones."

The Chinese smartphone market has been saturated. In fact, some segments of the market have contracted about 4%, according to government statistics.

[Read about Lenovo's new ThinkPad laptops.]

Lenovo also outlined in that announcement what actions that it will be taking in the future. This will include slashing about 10% of its non-manufacturing jobs, or about 3,200 employees. That equals about 5% of its total workforce.

The company will also incur restructuring costs of approximately $600 million and additional spending to clear smartphone inventory of approximately $300 million.

"Restructure the Mobile Business Group (MBG) to align smartphone development, production and manufacturing and better leverage the complementary strengths of Lenovo and Motorola," according to the company's Aug. 13 statement. "There will be a more-simple, streamlined product portfolio, with fewer, more clearly-differentiated models. … MBG will continue to drive the overall mobile business, but will now rely on Motorola to design, develop and manufacture smartphone products."

Larry Loeb has written for many of the last century's major "dead tree" computer magazines, having been, among other things, a consulting editor for BYTE magazine and senior editor for the launch of WebWeek. He has written a book on the Secure Electronic Transaction Internet ... View Full Bio
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larryloeb
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larryloeb,
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8/16/2015 | 11:07:25 AM
Re: You should know better.
Carrier subs (and the 2 year plans that they require) are going away. If Verizon is bailing on them, everyone else follows. I'm not sure that the subs forced handset adoption or that they were just a reflection of customer demand.

That means the real price of a phone will be paid as a line item, not buried in the agreement.

Marketing means giving people reasons to use your product. It doesn't have to cost billions. Remember that many are still happy with "feature" phones that just connect to the phone network. The marketing out there still doesn't give them a reason to change.

Tablets have been a strange mix of phone and computer. Yes, I think they will become cheaper as they mature.
larryloeb
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larryloeb,
User Rank: Author
8/15/2015 | 10:09:34 PM
Re: You should know better.
Know how Apple gets away with it?

Their OS and the ecosystem around it, not the hardware.

Android is totally vulned because of all the different Android versions out there.

Apple rules their OS, and doesnt have to put up with what manufacturers do. They are the manufacturer.
larryloeb
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larryloeb,
User Rank: Author
8/15/2015 | 12:09:45 PM
Re: think different
Yeah, commodity PC business is tanking. But it has been for awhile. People have other computing choices.

VR is going to be a competitive business, too. I don;t know much about Hive, but the software that uses it will no doubt be a big factor in its adoption.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
8/13/2015 | 5:28:26 PM
think different
Differentiation on Android isn't easy, particularly when the more software these hardware companies add, the worse the user experience generally is.
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