NEW YORK (CNN/Money) - Martha Stewart Living Omnimedia Inc. said late Thursday it will replace Sharon Patrick with former ABC Entertainment president Susan Lyne as its new president and chief executive officer.

Former ABC entertainment president Susan Lyne, above, will take over as CEO of Martha Stewart Living Omnimedia, replacing Sharon Patrick.

Patrick, who took over as CEO following Martha Stewart's indictment in mid-2003, has informed the company her wish to resign, MSO said in a statement. Lyne has served as a director of Martha Stewart Living since June.

Lyne was the head of ABC Entertainment for more than two years before she left this spring amid a management shuffle at the Walt Disney (Research) unit. During her tenure, ratings at the money-losing ABC television network continued to fall. The network has rebounded under new management and a handful of hit shows. But some credit ABC's new found success to Lyne, who had helped develop new successes, including "Desperate Housewives" and "Lost."

Prior to ABC, Lyne worked as the managing editor at The Village Voice, a New York-based weekly paper. She also helped create Premiere magazine for News Corp. in 1987.

The changeover at Martha Stewart Living (Research) comes two weeks after the company once more reported steep losses. The company has been in a steady slide since Martha Stewart's legal troubles came to light more than two years ago.

Stewart, 63, is now serving a five-month prison sentence at a minimum-security lockup in West Virginia. She was convicted earlier year of lying to government investigators during an insider trading probe.

Stewart was sentenced to five months in prison and five months in home detention. While the judge overseeing her case said she could remain free pending the outcome of her appeal, Stewart opted to serve her time in part so she could get back to her company as quickly as possible.

With Patrick at the helm, the company has tried to develop products that are not closely identified with the Martha Stewart name. But those investments, coupled with continued advertising losses at its flagship Martha Stewart Living magazine, have taken their toll.

Martha Stewart Living is on track to report its second annual loss since going public in 1999.

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During a conference call with analysts last month, Patrick said she was optimistic that advertising revenue would rebound in the second quarter of 2005, or soon after Stewart finishes her prison term and is allowed to work 48 hours a week on company matters while serving the home detention portion of her sentence.

It's not yet clear whether Stewart, whose current title is chief editorial and media director, will ever serve as an officer or director of Martha Stewart Living again. That's because the Securities and Exchange Commission has filed a civil lawsuit that, among other things, accuses her of insider trading and seeks to bar her from holding a top-level position at the company.