Lenovo CEO steps down

President and CEO William Amelio resigns after the Chinese PC maker posts sales loss of US$97 million in third-quarter 2008. Lenovo warns next several quarters will remain "very challenging".
Written by Eileen Yu, Senior Contributing Editor on

Lenovo President and CEO William Amelio resigned Thursday after the Chinese PC maker reported a US$97 million loss in the third quarter of 2008, ended Dec. 31.

Yang Yuanqing

Yang Yuanqing

In a statement filed with Hong Kong Exchanges and Clearing, Lenovo's board of directors said Yang Yuanqing has relinquished his role as chairman to replace Amelio as CEO, effective Feb. 5, 2009. Yang will remain as an executive director, and had served as the company's CEO until April 2005 when he was appointed board chairman.

The announcement comes at the end of Amelio's three-year contract with the company, Lenovo said, adding that Amelio will serve as a special advisor until Sep. 30.

William Amelio

William Amelio

In a separate filing with the Hong Kong stock exchange, Lenovo reported losses of US$96.7 million in the quarter ended Dec. 31, 2008, compared to a US$172.6 million profit in the same quarter 2007.

The PC maker said a market shift toward entry-level PCs, aggressive pricing and currency fluctuations had affected Lenovo's gross margin, which dipped to 9.8 percent year-on-year. Its gross profit fell 48 percent to US$354 million.

Coupled with a decline in sales, the pressure on margins resulted in the third-quarter loss, the company said.

According to figures from IDC, the Asia-Pacific PC market registered its first year-on-year decline in a decade, where unit shipments in the fourth quarter of 2008 dipped by 5 percent to 17.2 million.

A former Dell Computer executive, Amelio himself had replaced previous Lenovo CEO Stephen Ward in December 2005--a year after the Chinese company purchased IBM's PC group.

Amelio's resignation follows Lenovo's announcement last month to cut its workforce by 11 percent, or 2,500 jobs, encompassing positions in management and support functions. Under the restructuring, Lenovo said its Greater China, Asia-Pacific and Russia operations will be consolidated into a single business unit.

The cost-cutting exercise is expected to help the company achieve savings of US$300 million annually, with cost reductions across "nearly every business unit", a company spokesperson said in an earlier interview with ZDNet Asia.

In the filing with the Hong Kong stock exchange, Lenovo said it will "continue to adjust its business model" in line with the market trend toward entry-level PCs. However, the company said the next several quarters will remain "very challenging" for Lenovo and the overall PC industry.

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