PC maker Lenovo Group says it is in discussion with ‘an independent third party’ to bulk up its operations with the acquisition of Packard Bell, which claims to hold the third position in Europe’s consumer PC market place.
A deal seems close as Lenovo says in a terse statement it is continuing negotiations and undertaking certain necessary enquiries with third parties and government bodies in preparation for a definitive agreement.
Sale of the company seems curious as its long-term owner, the electronics conglomerate NEC, announced in October 2006 that it had sold Packard Bell for an undisclosed price to companies controlled by Lap Shun (John) Hui, the entrepreneur who sold eMachines to Gateway for $266m in 2004.
NEC had earlier moved Packard Bell’s corporate operations to its own brand, leaving it to concentrate on the consumer market. This led NEC to conclude that Hui, with extensive experience in the consumer personal computer business, was better placed to handle Packard Bell’s business.
The flamboyant Hui had made an unsuccessful attempt to re-enter the market last year when he offered struggling PC maker Gateway $450m to buy its retail operation, its only successful and expanding business. The offer was rejected but it was clear that Hui would make a move back into PCs as a three-year non-compete agreement with Gateway as part of the eMachines sales agreement, expired in March 2007.
Lenovo may have made Hui an offer he feels he cannot refuse but he is one of those rare, rich individuals with more on his mind than money. He paid $161m to take eMachines private in 2001 and then gave $72.5m of the profit he made on the Gateway deal to the 140 eMachines employees.
Lenovo moved into the big time in December 2004 when it bought IBM’s PC business for $1.75bn to become the world’s third biggest supplier. Initially, it struggled to absorb the operation. But with Dell ail-ling, in its latest quarter it reported net income up from $5m to $67m on sales 12.9% higher at $3.9bn.
NEC struggled for years to make money from Packard Bell and eventually exited the US market to stem the losses.
Packard Bell did not respond to our request for clarification of its current ownership.