Lenovo acts to scale back Brazil unit

Move is part of firm's effort to reduce costs amid falling demand

Lenovo Group Ltd, the world's largest personal computer maker, is scaling down its business in Brazil, as part of its broad efforts to reduce costs amid declining consumer demand and increasing financial pressure, Brazilian media reported.

The Beijing-based company has reduced its workforce in Brazil from 5,000 staff to 800, according to Brazilian newspaper Valor. It also reportedly has relocated its manufacturing plant from a 52,000-square-meter facility in Sao Paulo state to a facility that is half the size.

Lenovo did not immediately respond to a request for comment.

The restructuring plan came shortly after Lenovo decided to cut up to 1,000 jobs at its Motorola unit in September, in a bid to turn around its smartphone business.

Xiang Ligang, an expert and founder of industry website cctime.com, said Lenovo is facing increasing pressure from rivals such as Dell Inc and HP Inc in the global arena.

In the third quarter of 2016, Lenovo accounted for 21.3 percent of the global PC market, but its shipments declined 3.2 percent year-on-year, while HP and Dell recorded 3.3 percent and 6.2 percent growth, respectively, data from International Data Corp showed.

When it comes to the Brazilian market, Lenovo also trails behind the two rivals in terms of market share.

"This is a sensible decision, given the recession in Brazil," Xiang added.

But according to Jacky Zhao, an analyst at IDC, as the Chinese PC market begins rebounding from the bottom, Lenovo will regain its edge.

"The firm still has a dominant position in China. Its well-established brand and retailing channels will give it a boost," Zhao said.

IDC forecasts the Chinese commercial PC market will grow 2.2 percent in 2017, putting an end to several quarters of decline as local firms scramble to embrace digital transformation.

Lenovo Chairman Yang Yuanqing said earlier that the PC unit would continue to be the company's pillar business, and demand for PCs won't decline forever.

In October, Lenovo confirmed it is in discussions with Japanese tech firm Fujitsu Ltd to merge their personal computer businesses, in the hope of boosting margins through synergies.

On Tuesday, it launched Phab2 Pro, its first smartphone to host augmented reality applications in China, and unveiled a new middle-end handset to target young consumers.

In the quarter ended in September, Lenovo saw an 8 percent decline in revenue.