* Smith resigned by mutual agreement, effective immediately

* New CEO Engstrom has been Elsevier CEO since 2004

* Smith divided opinion with rights issue, investment plan

* 2010 operating margin seen lower

* Shares down 6 percent

(Adds background, analyst comment, updates shares)

By Georgina Prodhan and Kate Holton

LONDON, Nov 11 (Reuters) - Reed Elsevier's (REL.L: Quote, Profile, Research) (ELSN.AS: Quote, Profile, Research) chief executive, Ian Smith, has resigned because he was wrong for the times, the publisher said on Wednesday, replacing the industry outsider with a proven company insider, Erik Engstrom.

Smith, just eight months in the job and known for transforming companies, will be replaced immediately by the head of Elsevier, the company's scientific-publishing division.