Our suggestion last July (CI No 3,194) that things weren’t going to well for number two US PC maker Packard Bell NEC Inc appear to have been a timely warning as the company is preparing to layoff 1,000 of its 6,000-strong workforce, according to Nihon Keizai Shimbun. The report, which says the company will announce a restructuring this month, follows on from Christmas Day’s news that NEC Corp will pump a further $300m into Packard Bell NEC Inc and is upping its ownership in the PC maker from 19.84% to 49%. NEC wants to keep Packard Bell, which incorporates all of the Japanese giant’s PC interests outside of its home territory, from falling further behind market leaders Compaq and Dell and to oversee a difficult IPO which is also looming for the Sacremento, California-based concern. NEC has invested $1.3bn in Packard Bell NEC over two years but the PC maker is reported to have fallen way short of expectations, recording sales of some $5bn this year where it was supposed to have been doing $8bn by now. While the absorption of Packard Bell Electronic Inc into NEC appears almost complete with news of the funding, Compagnie des Machines Bull SA, whose Zenith Data Systems PC operations were merged into Packard Bell in 1995 (CI No 2,700), will see its holding in the company decline to 12.62% from 19.84% even though it’s agreed to pick up $60m of the $300m tab. Just to make it more complex, NEC owns 17% of Bull. NEC now gets three votes on the board, Bull has two and four are held by original Packard Bell founders. NEC spent $190m on its original 19.84% voting stake in 1996 when it spun off its US PC operations and combined them with Packard Bell’s in a holding company called Packard Bell NEC. Only last July NEC kicked in a further $285m to fund a build-to-order direct sales model of the type pioneered by Dell and copied by practically everyone else, which was seen at the time as an indication things weren’t going too well at privately-held Packard Bell NEC (CI No 3,194). For its part, Packard Bell NEC says the funding demonstrates further commitment to its consumer PC brand strategy in the run up to its IPO, although the Shimbun suggests the new funding will be used to develop Packard Bell NEC’s commercial systems arm rather than the consumer business. It says NEC will also withhold half of the $300m until it examines Packard Bell NEC’s restructuring plans. Although Packard Bell NEC was the number two US supplier of PCs in 1996, research company IDC says the company’s share has been declining on a quarter-by-quarter basis during 1997. It held it an 8.1% of the market in the third quarter of 1997 down from 9.4% in the second quarter. It’s also running up to a public offering at a time when the return on IPOs is much less than it was a year ago and the meteoric rise technology stock prices appears to be abating. The company did not return our calls but a spokesperson quoted on Reuters denied the Shimbun report.
