Lenovo CEO resigns as PC maker posts $97M loss

William Amelio steps down; vendor brings back former CEO who 'built our China business'

William Amelio resigned today from his job as president and CEO at Lenovo Group Ltd., as the PC maker reported a $97 million loss for the last three months of 2008.

Amelio, a former Dell Inc. executive, had led a broad restructuring of Lenovo's worldwide operations since he took over as CEO in late 2005. Just last month, for example, Lenovo said it planned to lay off 2,500 workers, cut executive salaries and combine its operations in Russia and the Asia-Pacific region.

But the company's business outlook has only grown worse since then. In today's announcement of its latest financial results and Amelio's departure, Lenovo said revenue declined 20% on a year-to-year basis in its fiscal third quarter, which ended Dec. 31. And in a filing submitted to the operator of Hong Kong's stock exchange, the company warned that it "expects the next several quarters [to] remain very challenging for Lenovo and the rest of the PC industry."

Lenovo said Amelio's three-year employment contract had expired. He will work as an adviser to the company through the end of September, the company said in a separate filing to the Hong Kong exchange. "Mr. Amelio confirmed that he has no disagreement with the board, and there are no matters in respect of his resignation that need to be brought to the attention of the shareholders of the company," Lenovo wrote in that filing.

But the sudden nature of Amelio's departure caught many Lenovo watchers by surprise. "They said he had a three-year contract, but that just raises the question of why they didn't renew it," said Bryan Ma, an analyst at the Asia-Pacific unit of market research firm IDC.

Amelio is being replaced as CEO by Yang Yuanqing, who was Lenovo's CEO from 2001 to 2004 and has been its chairman since then. Liu Chuanzhi, Lenovo's founder and chairman prior to Yang, will now re-assume that position at the company. Rory Read, who had been Lenovo's senior vice president of global operations, is being promoted to president and chief operating officer.

Lenovo said its third-quarter results were hurt primarily by a slowdown in the Chinese PC market, which accounted for almost half of its sales in the quarter. Shipments in China during the third quarter fell 7% compared with the same period a year earlier, according to Lenovo, which said that its new management team plans to focus more closely on China in an effort to boost sales there.

"Lenovo has grown successfully on the international stage, but at this important time, we want to pay particular attention to our China business, as it represents the foundation of our global business and growth strategy," Liu said in a statement. Liu added that Yang "built our China business" and that his knowledge of that market and ability to execute in China "are unmatched in the industry."

But Ma isn't convinced that bringing back the company's former leadership will put Lenovo back on track. "They're still going to have a lot of the same challenges they had before," he said, adding that Lenovo suffers from an "identity crisis" and faces daunting operational and product development challenges.

Amelio is the second American CEO to step down since Lenovo acquired IBM's PC division in 2005 and moved its corporate headquarters to the U.S. His predecessor, Stephen Ward, who became CEO immediately following the acquisition, resigned later that year.

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