Olivetti fall from grace pushed by PC decision

The company's move to retain it's weak PC division has proved unpopular as share prices plummet

Italian manufacturer Olivetti's share price has slumped to a new low following a declaration from chief executive Corrado Passera that it is to retain its loss making PC arm.

At a press conference held at Cebit last week, Passera revealed that the company aims to sell between 900,000 and 950,000 PCs this year in its target to break even and hold on to the number four slot it won in Europe in Q4 1995. And Olivetti wants to achieve this without slashing prices.

Passera said the company would cut prices only when component price falls allowed. 'In this industry, the prices only ever go down,' he said in an interview with Reuters.

'The only initiative we want to take is to be among the first to cut every time this happens.' He claimed Olivetti led the round of recent price cuts but added that he would not pursue an aggressive price-cutting strategy.

The Olivetti PC company accounted for 22 per cent of group sales in 1995, but nearly 100 per cent of losses. Chief executive Carlo de Benedetti has said the PC business must break even in 1996 or it will be sold off.

Passera confirmed that the company had axed staff numbers from 4,500 to 1,800 in a bid to get back into profit. He said Olivetti was prepared to shed even more staff if absolutely necessary.

The Milan stock exchange marked down Olivetti shares to a new low of L760, 38 per cent off the December 15 market price of L1,233, when the firm successfully completed a huge rights issue.

Italian analysts are pressing Olivetti to discard its loss making PC venture, and concentrate on its Italian mobile phone venture.