NEC Corp has finally lost patience with Packard Bell NEC and has made the troubled PC maker a majority owned subsidiary by increasing its stake from 49% to 52.81%. The move has been expected (CI No 3,445) following a catastrophic period for the company that has been losing $124 for every $1,000 worth of goods […]
NEC Corp has finally lost patience with Packard Bell NEC and has made the troubled PC maker a majority owned subsidiary by increasing its stake from 49% to 52.81%. The move has been expected (CI No 3,445) following a catastrophic period for the company that has been losing $124 for every $1,000 worth of goods sold. NEC has converted preference shares to take its equity stake over the 50% mark and has invested an additional $225m in the company. The subsidiary status will allow NEC to exercise a greater degree of control. Groupe Bull, whose shareholding has been trimmed from 13% to 11.68% as a result of NEC’s increased holding, will put a further $25m into the company. While sales last year were almost $3.9bn, Packard Bell NEC lost $487m as savage price-cutting and a shrinking market share saw its margins vanish. Former Bull boss Alain Couder took over as chief executive officer at the beginning of last month. He says that, under his leadership, PB NEC will implement a restructuring and developing plan with the aim of an initial public offering. But an IPO looks like a distant dream for a company that has been unable to stem its falling market share. Figures from Dataquest last week showed that although worldwide PC shipments increased by 13.9%% in the second quarter of this year, output by PB NEC was down 1.8% to 940,000 units, giving it a 4.4% market share. The company’s fundamental problem is that it was geared towards home users and was devastated when major companies such as IBM and Hewlett-Packard Co moved into the domestic market. The formal announcement by NEC gives no indication of how it plans to reverse recent trends. Instead, NEC relied on statements of the obvious proclaiming that it is crucial that PB NEC enhance its competitiveness by realizing a seamless, global operation in product planning and development, marketing, sales and procurement. NEC claimed that PB NEC is currently improving its profitability, increasing sales, improving its relationship with the channel and reducing costs by restructuring which will include consolidation of plants and sales divisions. It also expects to make savings by using NEC’s procurement channel. NEC has invested $1.3bn in PB NEC over the past two years and pumped another $300m into the company at the start of this year as part of a restructuring. The company’s future depends on whether new CEO Coulder can work a miracle. After his appointment, he 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.