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Lenovo reports loss, CEO steps down

William Amelio has resigned at the end of his three-year contract as the company reports a loss of nearly $97m for the quarter
Written by Eileen Yu, Senior Contributing Editor on

Lenovo chief executive William Amelio resigned on Thursday after the Chinese PC maker reported a $97m loss in the third quarter of 2008, ending on 31 December.

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 chief executive, effective from 5 February, 2009. Yang will remain as an executive director, and had served as the company's chief executive 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 30 September.

In a separate filing with the Hong Kong stock exchange, Lenovo reported losses of $96.7m in the quarter ended 31 December, 2008, compared to a $172.6m 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 $354m.

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 five percent to 17.2 million.

A former Dell executive, Amelio himself had replaced previous Lenovo chief executive 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 $300m 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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