The long-awaited sell-off of the Olivetti PC company has arrived at last. The beleaguered Italian company announced last week that its loss-making PC division was to be bought by Piedmont International, a company set up by a group of investors specifically for the deal.
Piedmont is backed by Centenary, a UK-based holding company, and a number of unnamed investors. The head of Centenary is Edward Gottesman, a US lawyer based in London. Centenary was set up in 1986. Its interests include such diverse commodities as bone china and bicycles. The company is the majority shareholder in Raleigh, BSA, Gazelle and Triumph, along with Royal Worcester and Spode.
Last year saw a number of statements from Olivetti that let it be known it was eager to divest itself of its troublesome PC manufacturing concern. In October, Robert Colaninno ? Olivetti?s third CEO in as many months ? said the sale of the PC division was his first priority.
Although Colaninno denied accusations of asset stripping, he made it known that he had a comprehensive list of potential sales. But at the time, his attempts to make reassuring noises about Olivetti?s future were wide of the mark. Staff in Italy went on strike and shareholders began to question the wisdom of those at the helm of the company.
Colaninno said he intended to pull in some $527 million by the end of 1996 with the sale of selected Olivetti assets. The final price that Piedmont will pay for the Olivetti PC company will be decided by the company?s final net asset value as determined on 28 February, when the deal is due to be finalised. It has been estimated that it will be in the region of $159 million to $191 million.
The sale of Venture Capital USA and the eight per cent stake that Olivetti holds in Omnitel, has raised a further $60 million. This is less than half the amount that Colaninno had promised to find by now. Lexicon, Olivetti?s printer division, will be next on the list of assets for sale.
Olivetti will continue to hold a 10 per cent stake in the PC company, but it will have to buy this stake back from Piedmont for a sum of about $9.4 million, further reducing the positive impact of the purchase.
Analysts have reacted cautiously to the news and are waiting to see what Piedmont will do. A representative of IDC said: ?It will be a major challenge for Piedmont to push through efficiencies and restructuring with the co-operation of the Italian unions. But if the new company can put in place the kind of flexibility that we see in other smaller European PC vendors, there?s no reason why it cannot survive and be profitable.?
The concerns about whether the new owners will be able to transform the structure of Olivetti?s PC arm are echoed in the UK dealer channel. One dealer, who wished to remain anonymous, said the acquisition was more of an exercise in creative accounting than addressing the problems of an ailing PC maker.
?The management structure of the new company will have to change dramatically and if it doesn?t happen soon, some people will turn their backs on Olivetti for good,? he said.
?Anything else will look like an exercise in debt management ? nothing to do with restructuring the company where it matters.?
In the UK, Olivetti was at pains last year to point out its healthy sales figures, but the channel lost almost all confidence in the company as its financial problems worsened.
When the planned sale was announced, many dealers decided they wanted to distance themselves from the vendor. Not wishing to find themselves with thousands of pounds worth of stock from a defunct manufacturer that could no longer offer support, the dealer community waited to be reassured by Olivetti.
The sale of Olivetti?s PC arm to a holding company looks unlikely to be the confidence booster that it is obviously hoped to be. The new owner, Piedmont International, is being led by Gottesman, a US lawyer turned businessman, and the man being touted as the new executive chairman of the PC company is Gian Mario Rossignolo, the chairman of Electrolux Zanussi. Neither has experience of running a PC company.
Neil Marshall, Texas Instruments channel manager, expressed doubts that the channel would be impressed by the Olivetti sale. ?Nothing has been done to re-establish channel confidence,? he said. ?There will be a change of owner, but what else will change? The company will be led by the chairman of Zanussi ? I doubt this will be enough to restore people?s faith. Olivetti never really had much trouble selling their kit, they just couldn?t make any money out of it.
?It remains to be seen if they can ever generate enough income to turn things round.?
Notebook dealer Lapland UK said in October that it wanted to end its relationship with Olivetti when it began to run into support problems.
At the time, Lapland sales and marketing director Martin Clarke complained about the vendor?s attitude to faulty equipment. Lapland alleged that Olivetti was telling it to offer immediate refunds and replacements to dissatisfied customers. ?That?s all well and good,? said Clarke, ?but you just can?t run a business that way.? He went on to cite his lack of confidence in Olivetti?s future as the reason he wanted to stop dealing in Olivetti kit.
Unless the new owners of the PC division can address this crisis of confidence sooner rather than later, they will find they will have to dig themselves out of a very deep pit.
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