Lenovo CEO Resigns Amid Worldwide PC Sales Drop

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Lenovo CEO William Amelio resigned Thursday amid falling worldwide PC sales and tumbling profits for the company. Yang Yuanqing, current chairman of the board, will replace Amelio, according to Lenovo.

In addition, company founder and current board member Liu Chuanzhi will return as board chairman, a post he held from 2001 to 2004. The executive shuffle by Lenovo is an attempt to shake up leadership and kick-start revenue.

This is the first time in nearly three years that Lenovo has reported quarterly earnings losses.

In its third-quarter earnings call Thursday, Lenovo said its worldwide PC sales fell 5 percent year over year due to a continued decrease in the demand for high-end computing solutions. In China, specifically, which is Lenovo's key market, PC sales dropped 7 percent. Lenovo's consolidated sales for the third quarter fell 20 percent year over year to $3.59 billion.

Lenovo's notebook shipments were up 3 percent year over year, behind the rest of the industry, in which notebooks have seen a 19 percent sales boost globally. Despite the notebook shipment bump, Lenovo's consolidated notebook sales dropped 20 percent year over year to $2.1 billion, or 57 percent of total product sales worldwide for the quarter.

Meanwhile, desktop sales tumbled 21 percent to $1.5 billion, with shipments decreasing 11 percent year to year. Desktop sales accounted for 41 percent of Lenovo's total worldwide sales in the third quarter.

Lenovo also reported a pretax loss of $90 million from continuing operations. The loss for shareholders in the third quarter totaled $97 million.

"In the past quarter, same as many other companies, Lenovo was deeply impacted by the global economic turmoil," Yuanqing said. "We have taken actions to ensure that in an uncertain economy, our business operates as efficiently and effectively as possible and continues to grow in the future."

Lenovo last month initiated a massive worldwide restructuring program that the company hopes will help it save approximately $300 million in the next fiscal year.

The changes at the senior management level, including the resignation of Amelio, whose three-year contract is coming to an end, are effective immediately. Yuanqing will relinquish his duties as chairman to take a more active role as CEO.

Lenovo also created the position of president and COOand appointed Rory Read, currently senior vice president of operations, to those posts. In his new role, Read will continue to lead global operations and will assume the responsibility for global shared services.

Amelio will remain with the company as an adviser until September.

ITo right the ship, Lenovo plans to focus on its foundation: the Chinese PC market, said Chuanzhi. The PC sales operation it has in place in China is the model for which its international sales have been built on, and one of the most important markets Lenovo operates in. The company believes that by re-establishing itself on its home turf, the benefits will trickle down through the rest of the company.

"Lenovo is the top PC manufacturer in China," said Yuanqing. "We have taken our success in China and rolled out our SME strategies into the international market. I am confident in our ability to strengthen Lenovo's growth in China and emerging markets and remain committed to leading our global and diversified team."

The decision to focus on the Chinese market is an interesting one as it comes during a push into the U.S. consumer market. Earlier this year Lenovo introduced the Idea line of notebooks and desktops in an attempt to challenge Dell and Hewlett-Packard for a slice of the world PC market. As it stands, Dell, HP and Acer continue to widen the gap between themselves and Lenovo.

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