Lenovo announces loss, CEO resigns

[February 05, 2009]  BEIJING (AP) -- PC maker Lenovo Group announced a $96.7 million quarterly loss Thursday due to a drop in sales amid global turmoil and said CEO William J. Amelio resigned in a management reshuffle.

Amelio will be succeeded as chief executive officer by chairman Yang Yuanqing, Beijing-based Lenovo announced.

Yang said the company, the world's fourth-largest PC manufacturer, will try to increase its dominance in its home China market but denied that Amelio's departure means it is pulling back from ambitions to compete globally.

"I still want this company to be a global company. Absolutely we will focus not only on China but on global business," Yang said in a conference call with reporters.

Lenovo founder Liu Chuanzhi will return as chairman, succeeding Yang, the company said.

Sales fell 20 percent in the three months ending Dec. 31 from the same period of 2007. Shipments in China fell 7 percent.

Amelio said the company was hurt by slower Chinese sales growth and reliance on corporate customers, who have cut spending during the economic downturn.

"The fact that these markets, which are our sweet spots, have been hit hardest by the global economic conditions means that our financial performance has been impacted more profoundly than others in the industry," Amelio said on the conference call.

Lenovo warned in January that it expected a quarterly loss due to a restructuring that would cut 11 percent of its work force, or about 2,500 jobs. The overhaul was launched after profits plunged in the previous quarter.

Chief financial officer Wong Wai Ming said the company expects to record a $120 million restructuring charge, probably in the current quarter.

Wong said the PC market will "remain challenging" and he declined to say when Lenovo might return to profitability. However, he said, "I can assure you the management is very confident that the next fiscal year will be better than the current fiscal year."

Analysts have cautioned that Lenovo might face problems because it has failed to cut costs fast enough after its 2005 acquisition of IBM Corp.'s PC unit, which specialized in higher-margin corporate business.

Amelio, a veteran of Dell Inc. and IBM, joined Lenovo in 2005 and oversaw the integration of its business with the IBM unit. He was credited with cutting costs and developing consumer sales in Europe, India and other non-China markets.

Amelio, who was based in Singapore, said he was leaving because his three-year contract ended and Yang praised his "tremendous contribution" to Lenovo. But Yang also complained that outside China, "we have not adequately expanded our business and developed our business model in the past few years."

Liu, the returning chairman, said Lenovo would focus on China and emerging markets to compensate for weaker sales growth in Europe and the Americas.

"However, that is not to say we are giving up our business in those mature markets," he said. "We are enhancing our foundation in China so that we can have further development in the future in those mature markers. We are saying that at least we will do our best to protect our market in Europe and the Americas."

The company said Amelio also resigned as president and a member of Lenovo's board of directors. He is to be succeeded as president by Rory Read, senior vice president for global operation and president for the Americas.

Liu, a veteran of China's personal computer industry, was chairman of Lenovo until 2005, when he was succeeded by Yang, a former star salesman. Liu is a director of Legend Holdings Ltd., its controlling shareholder.

Yang was CEO from 2001 to 2005, a time when most of Lenovo's business was in China. He said the job will be tougher now that it oversees a global operation.

"I can feel the burden on my shoulders has become much heavier," he said.

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On the Net:

Lenovo Group: http://www.lenovo.com/

[Associated Press; By JOE McDONALD]

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