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February 21, 1999

MONEY-LOSING PACKARD BELL GETS $450M NEC HANDOUT

By CBR Staff Writer

In what may seem to be another triumph of hope over experience, NEC Corp is putting another $450m into Packard Bell NEC Inc (PBN), the number five PC maker and a serial loss-maker. PBN is to post sales for the current fiscal year that slumped 17% from the previous twelve months. This is despite a massive reorganization which saw staff numbers halved to 3,000 and a $250m investment by shareholders NEC and Groupe Bull in August 1998 (CI No 3465). Now NEC is donating $450m to an outfit which has turned selling PCs at a loss into an art form by buying out PBNÆs European subsidiary. The move increases NECÆs stake from 52.8% to 88% with Groupe Bull holding the remaining shares. Though PBN has become one of the most unsuccessful Japanese investments in the US IT industry, president and CEO Alain Couder insisted they were on course to make profits in the second half of this year — though the outfit is still expected to make a modest loss in the full financial year. PBN was hammered because its operation was geared to home users and margins vanished when major companies such as IBM and Hewlett-Packard Co, and cheaper imports, moved into the domestic market. Now NEC suggested that PBN can recover by moving upmarket and more models geared to business users are promised over coming months, funded by the extra NEC investment. NEC remains adamant that it will eventually be able to float PBN stock. Under the latest reorganization, Couder’s US operation will be responsible for North and South America. Groupe Bull SA will have a 20% holding in Packard Bell NEC Europe. This will be responsible for the rest of the world apart from Japan, which is handled by NEC. In contrast to the crumbling US operation PBN in Europe is on course to increase sales by 11.5% this year and makes a modest profit.

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