The web of links between NEC Corp and its long-time partner Compagnie des Machines Bull SA became a little more complex early yesterday when NEC announced that it would follow Bull’s Zenith Data Systems and also buy a 19.99% stake in big US retail personal computer manufacturer Packard Bell Electronics Inc, now of Sacramento, California. NEC is paying $170m for the stake, a fairly low price for a company with $2,800m of sales in 1994, but the low price reflects the desperately poor quality of earnings in the cut-throat personal computer business. Bull is taking up its pre-emption rights, paying about another $30m to maintain its own stake at 19.9%, so Packard Bell gets some $200m all told. It marks the second time that Packard Bell, which aborted a flotation a couple of years ago, has raised money by selling a stake to a would-be strategic partner rather than going public. Before the sale to NEC – which will be buying new shares, and will hand over the cheque in August, the three founders of the company – who bought the name for its historic resonances – still hold more than 70% of the equity. The company is valued at a fair bit more now, because Bull paid only $40m for its original 19.9%. NEC says combined sales of personal computers by itself and Packard Bell this year will come to 7.3m, but since this is now a three-way alliance, sales by Zenith should really be added in too. The deal looks like grim news for the employees at NEC’s remaining plants in Japan, because company president Hisashi Kaneko said the tie-up would help sales of NEC’s proprietary architecture personal computers in Japan, and help NEC cut costs in computer production. NEC will develop home computers with Packard Bell, and supply more CD-ROMs and memory chips – to Packard Bell; NEC is also hoping that the alliance will serve to promote its own technical standards for future multimedia products such as games, interactive television products and other software. NEC also looks to supply Packard Bell with three-dimensional graphics chip sets and colour liquid crystal displays – a key part of the Packard Bell-Zenith alliance was that Zenith would contribute a notebook dimension to Packard Bell’s product line. The two may also work together on television set-top boxes, but it looks as if the collaboration will be strictly on the iAPX-86 family, because NEC is very firmly in the R-series RISC camp while Zenith is toying with the PowerPC.
