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Lenovo CEO steps down

William Amelio resigns at the end of his three-year contract as the company reports a loss of nearly $97 million for the quarter.

Lenovo President and CEO William Amelio resigned Thursday after the Chinese PC maker reported a nearly $97 million loss for its fiscal third quarter.

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

William Amelio Lenovo

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 adviser until September 30.

In a separate filing with the Hong Kong exchange, Lenovo reported losses of $96.7 million in its fiscal third quarter that ended December 31. That compares with $172.6 million profit in the same quarter a year earlier.

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 over year. Its gross profit fell 48 percent to $354 million.

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

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

A former Dell Computer executive, Amelio 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 of 11 percent layoffs, 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 $300 million annually, with cost reductions across "nearly every business unit," a company representative 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. The company also said the next several quarters will remain "very challenging" for Lenovo and the overall PC industry.

Eileen Yu of ZDNet Asia reports from Singapore.