NEC Pulls Packard Bell PCs in US

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Event Summary

November 3, 1999 - Japan's NEC Corp. plans a restructuring of its U.S. Packard Bell NEC unit that will result in layoffs of about 80 percent of the unit's staff, the departure of senior management and its withdrawal from the U.S. retail personal-computer market, according to published reports Wednesday.

According to Packard Bell spokesman Ron Fuchs, NEC, together with French partner Groupe Bull, which holds 12 percent of the unit, had wanted Packard Bell NEC to post a loss of no more than $100 million in 1999, but the unit is on track for a loss of $150 million this year.

Reports state that Packard Bell will close its Sacramento, Calif., manufacturing facility, resulting in a loss of 1,000 jobs. It is also in talks to sell its call center in Magna, Utah, and expects the 600 workers there to be transferred to the new owner, and the unit will cut administrative staff by several hundred.

All told, Packard Bell will shrink by 2,600 employees to 300 to 400 total, according to reports.

Alain Couder, a former Bull executive who headed the unit for the past year and a half, will step down at the end of the year, as will 12 of the unit's 13 most senior executives, reports said.

Finally, the unit will withdraw from the U.S. retail PC market entirely, although it will explore options for selling consumer-oriented PCs over the Internet.

Market Impact

Consolidation of the PC marketplace continues, but this event is not surprising. Packard Bell, which a few years ago was battling for leadership in the home PC market, had essentially dropped off the US PC radar screen. It was not even in the top five in overall sales, and saw its Q2 worldwide sales decrease between 1998 and 1999 - a major blow, considering the worldwide market increased by 28% in the same period.

Part of Packard Bell's decline is traced to quality-of-service issues from four or five years ago, which led to brand-name damage. Overall, this announcement should have little impact on the corporate marketplace, with the exception of those companies purchasing, or planning to purchase, Packard Bell systems.

User Recommendations

Corporate users considering purchasing Packard Bell should find another vendor as a strategic partner. Although NEC has hinted that it may sell through the Internet, it will not be under the Packard Bell name.

If NEC goes through as expected with its call center sale, then companies presently using Packard Bell equipment should consider contacting other vendors immediately, with an eye toward replacing their current systems. Even if the call center does not disappear, layoffs there are expected, and companies will experience reduced support levels. (Note that these recommendations do not necessarily apply to other systems sold under the NEC logo.)

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