Martha Stewart Living Omnimedia Inc., still reeling from the legal woes of its founder, has named board member and former ABC entertainment president Susan Lyne (search) as its new chief executive and president, replacing Sharon Patrick, a chief architect of the multimedia empire.

Lyne, who has served as a director of Martha Stewart Living (search) since June 2004, has had a 25-year career in creative and business positions in the television, publishing and film industries.

"For personal and professional reasons I have decided to leave MSO and pursue other dreams, turning over the leadership of the company to others," Patrick said Thursday in a statement.

Patrick oversaw the buyback of Time Inc.'s (search) magazine and media interests to form with Stewart Martha Stewart Living Omnimedia, and helped establish a partnership with discounter Kmart as its exclusive retailer for mass merchandise, catapulting Stewart into a household name.

The management shake-up comes at a time when the New York-based multimedia company is still stumbling from the conviction of its namesake founder and former chairman and CEO of lying to investigators about her sale of ImClone Systems Inc. (IMCL) shares. Stewart is now serving a five-month prison sentence that began Oct. 8. After her release, the domestic diva will serve another five months of house arrest.

Patrick could not be reached for comment, but industry sources believe that Patrick's close relationship with Stewart could have prevented her from not asserting enough independence from Stewart's legal woes.

"She didn't do anything wrong, but her knowledge of Stewart personally could have put her in a position of presumed compromise," said Richard Hastings, a retail analyst at the Bernard Sands credit advisory firm.

Lyne most recently was president of ABC Entertainment from January 2002 to May 2004 and had held various executive positions at the network since 1998. She was ousted from ABC in a management shake-up after several years of disappointing ratings in prime-time. One of the shows she championed during her last year at ABC was "Desperate Housewives," which has become the network's biggest hit this season.

Prior to becoming an executive at ABC, Lyne was executive vice president of Walt Disney Pictures and Television Inc., from 1996 to 1998.

Officials at Martha Stewart Living did not immediately calls for comment.

In a telephone interview, Lyne said she was approached by board members recently, and hinted that Stewart — who owns 60 percent of the company's stock — did not play a role in the management changes.

"Martha was informed of the board's decision, and it was the board's decision, not hers," she said.

She added,"This is a phenomenally talented staff with more ideas that we can exploit. My job is now getting back to what they do best," she said. She said one of her priorities is to meet with advertisers, many of whom have retreated amid all the uncertainty, and "engage them in the possibilities here."

"I will be jumping into the job tomorrow. There's lots to do," she said.

Last month, Martha Stewart Living reported that its third-quarter losses widened from a year ago, and forecast a wider-than-expected loss in the fourth quarter as advertising revenues decline. Still the company said it is increasingly optimistic about the company's prospects for an advertising recovery in 2005.

Lyne said she has been an acquaintance of Stewart for a long time, but never knew her well.

"She is the creative engine of the company and has a lot of ideas," she said. "I am proud to lead MSO during this next phase of the company's growth," she said.

Before the management change was announced, shares of MSO rose 5 cents to close at $18.62 on the New York Stock Exchange. The stock gained 90 cents, or nearly 5 percent, in extended trading following the announcement.