OCW battles to stay in business
Troubled PC vendor seeks support of former parent Olivetti Group to put together rescue package.
While the industry's attention was focused last week on the Olivetti Group's hostile bid to acquire fellow Italian concern Telecom Italia, the other Olivetti - its troubled former PC unit Olivetti Computers Worldwide (OCW) - was busy fighting for its very existence.
Striking OCW workers stormed the Group's headquarters, seeking an audience with chairman Antonio Tesone to demand his intervention to avoid disaster.
As exclusively revealed in PC Dealer (3 March), OCW decided at an emergency shareholders' meeting on 25 February to file for court protection for three months in an attempt to stave off creditors.
There are discussions surrounding an MBO, for which, subject to shareholder approval, a five-bank consortium will step in with credit worth L130 billion.
But there are several interesting elements to the OCW debacle that cannot be ignored. In particular, a resounding lack of confidence in OCW's US holding company has been exhibited both by the unit and the former parent.
Piedmont International was set up shortly before the OCW acquisition by US financier Edward Gottesman as part of the Centenary Group, specifically to purchase and absorb the PC operation (PC Dealer, 27 January 1997).
At the time, the L250 billion sale came under fire from channel players, who described Piedmont as an asset stripper seeking to maximise its return, rather than acting in the long-term interests of OCW. The transaction was as controversial then as it is now and the resignation of Piedmont group executive Alessandro Barberis three months later did not help alleviate concerns.
In July 1997, Piedmont secured a total of $140 million with which to fund OCW - $65 million of its own funds, plus a $75 million loan from Merrill Lynch. But this came nowhere near to getting the PC manufacturer back on track.
And, more recently, OCW staff thought it more prudent to approach the former parent for resolution, despite Piedmont's 80 per cent stake in the unit, and even though Olivetti Group sold it off to the investment firm two years before. It retained a 12 per cent stake in Piedmont instead.
Olivetti Group is OCW's primary creditor, to the tune of L88 billion.
This gives it some say in the unit's future, but it no longer has a prominent equity stake in OCW. Tesone said as much last week after he was confronted by OCW staff. In a statement he said, while aware of the unease of the workers, the Group was not an OCW shareholder and had not been 'either directly or indirectly involved with management for two years'.
But the workers' pleas may have succeeded, as Roberto Colannino, chief executive of Olivetti Group, is understood to have stepped in and laid down conditions under which the giant would bail out its former division.
Subject to those conditions being met, the Group will agree to write off the L88billion debt and put up a further L50 billion. Insiders insisted this was not an equity investment.
There have also been discussions about the purchase of a stake in OCW by Olidata, Italy's second largest PC manufacturer, but that suggestion was said to have raised concern among OCW staff who feared its involvement would cost them their jobs.
Ian Davidson, UK marketing manager of OCW, said: 'The investment package will help us get product to market quicker. It's vital to continue to fulfil orders.'
But observers fear OCW has lost its credibility with resellers and customers.
If no financial package is forthcoming, it will be another story of a failed manufacturer.
OCW: THE SHAREHOLDERS
Piedmont International 80 per cent
Chaplet 4 per cent
Others 16 per cent
Olivetti Group's stake in 12 per cent
Piedmont International
After proposed MBO
Piedmont International 35 per cent
Management 55 per cent
Chaplet 10 per cent