Lenovo Posts Loss and CEO Gets Replaced
Lenovo Group today reported results for its third fiscal quarter ended December 31, 2008. During the third quarter, Lenovos worldwide PC shipments declined five percent year over year, due to a continued decrease in worldwide commercial PC shipments particularly at the high end, and a seven percent decline in the China PC market.
As previously announced, Lenovo initiated a worldwide restructuring program on January 8, 2009, which is expected to save the company approximately US$300 million in the 2009/10 fiscal year, while helping the company become more cost competitive and operationally efficient.
Consolidated sales for the quarter from continuing operations (excluding divested businesses) fell 20 percent year over year to US$3.59 billion. The Groups gross profit decreased 48 percent year over year, with gross margin at 9.8 percent. Lenovo reported a pre-tax loss of US$90 million (excluding a US$6 million restructuring charge) from continuing operations. The loss attributable to shareholders for the third quarter totaled US$97 million.
Basic earnings per share was (1.09) US cents, or (8.5) HK cents, and as of December 31, 2008, net cash reserves were US$1.3 billion.
In the past quarter, same as many other companies, Lenovo was deeply impacted by the global economic turmoil, said Lenovo CEO Yang Yuanqing. 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. The recent restructuring actions we have taken are a direct result of our focus on improving our cost-competitiveness and operational efficiency. In addition, we will also further differentiate our brand and product positioning, establish a corresponding end-to-end integrated organizational structure, and create product marketing mechanisms that can react to market changes more quickly. With all these actions in place, we believe Lenovo will emerge as a more efficient and competitive company.
Additionally, the board of directors of Lenovo today announced a series of management changes designed to strengthen the Companys ability to deliver on its stated long-term global strategy.
Lenovo founder and board member, Liu Chuanzhi, has returned as chairman. Yang Yuanqing, the current chairman of the board, has returned to the role of CEO, a position he held from 2001 to 2004. Yang replaces William Amelio, who has come to the end of his three-year contract. Rory Read, Lenovos senior vice president, operations, has been named to the newly created position of president and COO.
These senior management changes are effective February 5, 2009. Amelio will remain with the Company in an advisory capacity until September.
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, said Liu Chuanzhi, the Companys founder and returning chairman. We have the particular benefit of naming Yang Yuanqing to the CEO role since he built our China business. His in-depth knowledge of that market and ability to execute there are unmatched in the industry. We believe he is the right person to lead Lenovo for the next several years. Im pleased to return to my role as chairman and look forward to working in the best interests of our shareholders with Yuanqing and Rory.
Lenovo is the top PC manufacturer in China, said Yang. 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 Lenovos growth in China and emerging markets, and remain committed to leading our global and diversified team.
I would like to express my sincere appreciation to Bill Amelio for the significant contribution he has made during his time with Lenovo, added Liu. He has brought tremendous operational expertise to bear on all aspects of the company, organizing and streamlining the business, and helping transform our business into the global leader it is today. Together, we are proud of the global culture that we have created and we are pleased that he has agreed to remain as an advisor to the Company.
Over the past three years, weve implemented a successful international strategy and Lenovo has joined the ranks of the top global PC companies, said Amelio. Our brand is recognized around the world, we have developed a solid reputation for quality and innovation, and our customer service is second to none. Im pleased with what we have accomplished as a team.
In his new role as president and COO, Read will continue in his existing role leading global operations and is also assuming responsibility for global shared services. Read has been with the Company for three years and currently holds the position of senior vice president, operations, as well as acting president of Americas, Japan, Australia/New Zealand and Center of Excellence.
In todays challenging business environment, Lenovo is well-positioned for future success, said Read. I look forward to working closely with Chairman Liu and Yang Yuanqing to help strengthen and grow our global business.
