Once upon a time, loss-making PC vendors got taken over - especially if they had significant market share. Nowadays, they die. Some people would say this was an indication of market maturity.
Consider the problems PC vendors face when they buy loss-making rivals. You don't have to look very far. Mitsubishi/Apricot and Commodore/Escom are two high-profile failures that spring to mind.
The Packard Bell/NEC combo is not on the casualty list - yet. But it is clear that NEC is losing patience with its US subsidiary. It threatened to pull the plug after the PC vendor posted worse than expected losses in April and May. In an interview with Bloomberg News, Kouji Nishigaki, president of NEC, said: 'If things don't work out in the end, there's nothing to do but get out.'
Nishigaki admitted that NEC will 'sell, merge or close' Packard Bell unless there is a turnaround. The odds on Packard Bell's survival - certainly as a brand - cannot be good following the comments of its usually circumspect Japanese owner.
The company's losses ballooned in April and May, following aggressive price cutting. It now has 3,000 staff, compared with 6,000 at its peak.
More are set for the chop in a new round of blood letting.
For a nanosecond or two Packard Bell was the world's fourth biggest PC vendor, thanks to huge sales into the retail channel in the US and, to a lesser extent, in Europe. While other PC manufacturers retired hurt from retail - including Dell, AST and Olivetti - Packard Bell went from strength to strength. But that was because it was prepared to sacrifice profits for market share.
This is a dangerous game to play. As the saying goes, you can't buy market share, only rent it.
Packard Bell thought it could build a dominant position in the retail channel, but it was wrong. Product reliability - or lack of it - did not help. But more significant was the nature of the retail sector. This is not exactly characterised by customer loyalty or brand 'stickiness'. Retailers, not vendors, are the key to getting consumer PC buyers. And if, for example, high street retailer Dixons chooses to sell Hokey Cokey PCs, that's what its customers will buy.
For years, Packard Bell founder Beny Alagem and family ran a profitless, private business. And ran it very successfully, too ... if you disregard the profitless bit of the equation.
And being profitless, Alagem eventually had to turn to outside funding.
Groupe Bull injected money and PC building operations. Then, in 1998, NEC took over the shop, following a deterioration in Packard Bell's sales.
Alagem resigned in a huff, citing policy differences. Last heard of, Alagem had taken control of AST, another damaged vendor, with the intention of taking it into the retail market. Maybe he can work his magic there.
Packard Bell is a different matter. At some point companies have to make money or they disappear.
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