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Lenovo Announces Plan for Enhanced Responsiveness to Customers, Global Competitiveness and Operational Efficiency

   

PURCHASE, NY, March 16, 2006 — Lenovo Group Limited today announced an action plan to enhance responsiveness to customers in all of its markets, strengthen Lenovo’s global competitive position, and increase operational efficiency.

"We want Lenovo to deliver profitable, sustainable growth everywhere we do business," said William J. Amelio, president and chief executive officer of Lenovo. "The plan we are announcing today helps us achieve that, positioning Lenovo to pursue growth aggressively in both the relationship and transaction customer segments and delivering a cost structure that better reflects the realities of today’s highly competitive, global PC industry," Mr. Amelio said.

"Our plan integrates Lenovo’s global sales organization and back-office support into one highly responsive customer-service unit, and ensures that, where it makes sense, teams are centralized for better performance and efficiency," said Mr. Amelio. "These steps position Lenovo as a more effective global competitor while supporting our commitment to lead in innovation and customer satisfaction," Mr. Amelio said.

Through the plan, which will be completed in six-to-12 months, the company expects to achieve annual end-to-end run-rate savings of approximately US$250 million. "We intend to drive a substantial portion of the anticipated run-rate savings into programs that will help Lenovo combat competitive pressures around the world and leverage our new products and brand recognition," said Mr. Amelio.

The actions include a resource reduction of approximately 1,000 regular, full-time positions in the Americas, Asia/Pacific and EMEA, which is approximately five percent of the 21,400 regular employees in Lenovo Group, and other expense savings. Lenovo said it anticipated a restructuring charge relating to the plan of approximately US$100 million, most of which will be taken in its fourth fiscal quarter which ends March 31, 2006.

The key components of the Lenovo plan include:

"The resource reductions that are part of this plan are, without question, the most difficult part of our program. We have thoroughly examined Lenovo's competitive position, and it’s clear that for the future of the company, we have to take these actions," said Mr. Amelio.

"We intend to communicate all details to affected employees as soon as possible, to be open and clear with all employees on what to expect and when. We will work with affected employees during the transition period and provide both financial and career-transition assistance," said Mr. Amelio. "The steps we are taking are not easy. However, for Lenovo to be a world-class competitor, we must take these steps."

"Consistency and continuity for customers are a top priority as we move ahead with our initiatives," said Mr. Amelio, who said that the customer-facing sales and service teams will remain virtually intact. "Most customers will continue to work with the same teams. Keeping our commitment to customer satisfaction paramount, the plan integrates the key functions customers depend on — sales, support and fulfillment — to provide a "one-touch" relationship that's simpler and more responsive. Our customers will also benefit from the changes in our global supply chain, which will improve our efficiency and execution."

"Ultimately, as we continue to grow our business profitably, our plan and actions will create a Lenovo that is stronger, more efficient, easier to do business with, and therefore, a company that offers even greater opportunities for our employees worldwide." Mr. Amelio said.

"Our global strategy will remain focused on developing high-growth markets such as SMB and emerging countries. In the current stage of the strategy execution, substantial strides forward have been made in all key areas — innovation, customer satisfaction and operational excellence — notably through our recent introduction of the Lenovo 3000 products worldwide and our terrific performance as the computer hardware provider to the 2006 Winter Olympics. I believe our action plan will drive additional successful strategy execution toward our goal of profitable growth," said Mr. Amelio.

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

About Lenovo Lenovo (HKSE: 992) (ADR: LNVGY) is the world's most innovative personal computing company, with a business model built on innovation, operational excellence, customer satisfaction and 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. For more information about Lenovo, visit www.lenovo.com .