November 2, 1999 4:40 PM PST

Packard Bell plans massive layoffs

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Packard Bell NEC announced a massive restructuring that will result in layoffs of as much as 80 percent of the company's workforce and the end of the Packard Bell consumer brand on U.S. retail shelves.

In addition, chief executive Alain Couder, brought in to attempt a turnaround, will be stepping down once the restructuring is complete, said Ron Fuchs, a company spokesman.

Other high-level executives will be leaving as well. The entire process is expected to be complete by the end of the first quarter of 2000, Fuchs said.

The huge cutbacks and executive turnover will top continuing losses at a company that was once the second-largest PC maker in the United States. Sacramento, California-based Packard Bell has approximately 2,600 employees. After the restructuring, the company will have approximately 300 to 400 employees, Fuchs said.

Packard Bell had promised to reduce its 1998 losses from $650 million to $100 million this year. However, the losses will likely be in the range of $150 million, Fuchs said. Industry analysts have said the company is being sustained largely by the sales of NEC computers in Japan.

Having defined the retail computer landscape in the mid-90's, Packard Bell will be getting out of the U.S. consumer market to concentrate on the commercial market, said Fuchs. In the future, the company will sell its PCs under the NEC brand.

Packard Bell PCs will continue to be marketed under that brand in Europe, "but you will be hard pressed to find a Packard Bell PC in the U.S." next year, he said.

The restructuring was announced during a conference call with employees. Among the changes: Packard Bell will outsource its manufacturing to an as-yet-to-be-determined contract manufacturer and the company will severely reduce the workforce at the manufacturing facility in Sacramento. Layoffs will occur in all levels and departments, said Fuchs.

NEC will move its headquarters to Mountain View, California, from Sacramento, but will keep about 125 people there to support its commercial operations, sources said.

Packard Bell NEC's sales have been dropping at a time when the big PC sellers' sales have been going up, according to market share figures released last week. The company's unit shipments dropped 6 percent in the third quarter of 1999 compared to the third quarter of 1998, according to International Data Corporation.

In July 1998, Couder, the former chief operating officer of Groupe Bull, was named chairman of the executive committee of Packard Bell NEC's board of directors, and in September, he became CEO, replacing the resigned Beny Alagem.

In April 1998, the Packard Bell NEC joint venture said it planned to make an initial public offering in the United States, but the IPO never materialized.

 

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