Nec May Turn Packard Bell Nec Into A Subsidiary

Computergram International, July 6, 1998

NEC Corp is considering a plan to make struggling US PC maker Packard Bell NEC Inc a subsidiary. The Japanese company currently has a 49% stake but it has been clear for some time that the Japanese company has been losing patience with management s failure to arrest the company s decline. "We would consider making Packard Bell NEC a subsidiary as part of a new restructuring plan for Packard Bell NEC," an NEC official said in Tokyo.

Packard Bell NEC incorporates all the Japanese giants PC interests outside its home territory but has been losing market share rapidly to Compaq and Dell. Latest symptom of NEC s frustration is the resignation of Packard Bell s founder Beny Alagem as chairman and chief executive due to differences with shareholders (CI No 3,444). He has been replaced by Alain Couder, former chief operating officer at Groupe Bull, which owns 13% of Packard Bell NEC. How NEC plans to bring Packard Bell back on track remains a mystery as the company has already pruned staff, introduced a direct sales model and brought prices of its low end model below $700 to cash in on the boom in demand for inexpensive machines. But analysts Dataquest estimate that in the first quarter of this year, Packard Bell s sales fell 1.4% while Compaq saw a 39% rise and Dell stormed ahead by 66%. NEC had ambitions to see Packard Bell NEC floated on the stock market but its under-performance rules this out in the near future. New CEO Coulder told reporters: "It is too soon to tell you when the global company will turn profitable, but there are some areas that are profitable today."