Here is an IDC analyst's initial take on the Packard Bell, NEC merger
to read with the description of the new machines. This is old news, but it's nice to see how they've progressed.
idcresearch.com
Packard Bell last week announced intentions to merge its operations with NEC's non-Japanese PC operations to form a new company, "Packard Bell NEC." The new company would continue to operate under Packard Bell's current managerial structure with current CEO, Beny Alagem, as the new company's CEO. The merger would make the new company the largest PC vendor in the U.S. - outstripping Compaq slightly by 14.1% market share to Compaq's 12.7% share in unit shipments for Q196, according to IDC data. (Packard Bell already controls the assets of the former PC vendor, ZDS.) The new company would also become the third largest in the world. (Currently, Packard Bell ranked fourth in worldwide shipments for the quarter and NEC was fifth.)
Snapshot Analysis
On balance, we believe this agreement makes much business sense for the two companies: Packard Bell and NEC. Much of the fruits of this proposed merger, such as consolidated manufacturing and greater joint product development and component procurement, were actually formed when NEC first invested more than $400 million in Packard Bell in July 1995 and again in February 1996. NEC, for example, could lower its international manufacturing costs by leveraging its relationship with Packard Bell and generate greater economies of scale and efficiencies. Also, consolidating the business units could allow the partners to begin merging together some of their U.S.-based operations to generate further efficiencies. Going forward, the new Packard Bell NEC could begin to merge the two consumer lines into one expanded product portfolio and eliminate redundancy.
Despite an attractive business model, however, we still remain cautious over the longer-term outlook of this merger. At the end of the day, acquisitions have rarely succeeded in the PC industry and the merger of these two business units will not necessarily produce a giant. (Take a look at the failed attempt of AST/Tandy, Daewoo/Leading Edge, or AT&T/NCR.) Moreover, the efforts necessary to absorb NEC's operations into the Packard Bell infrastructure could derail Packard Bell's near-term ability to compete in the increasingly-competitive U.S. desktop market. Packard Bell has already commenced the integration operations with ZDS assets and could realize higher short-term costs in merging the NEC operations. Also, it is unclear how a joint Packard Bell NEC association would compete in the commercial market. NEC has developed significant momentum in the U.S. commercial desktop and portable PC markets and it is unclear how the transition to a new managerial structure would impact these run-rates.
Market Impacts
Given these challenges, we see very little near-term impacts on the market as a result of this proposed merger. While Packard Bell NEC would technically become the largest PC company in the U.S., the new company would still trail significantly the worldwide PC market leaders, Compaq and IBM. The growing control of NEC over Packard Bell combined with NEC's deep financial pockets could pose a threat to traditional market leaders in the longer-term.( If you combine this analysis with the amount of money and work that has gone into their new CUBE containing lineup, its clear that they are working hard to gain some market share and didn't want any poor DVD solution holding them back Much of this longer-term success, however, would be determined by Packard Bell NEC's management of the current assets that the two companies bring. As it stands now, Packard Bell NEC would simply be a conglomerate of a strong home line, a mid-tier, engineering-oriented supplier whose Intel-based business is almost exclusively concentrated in the U.S., and a dying ZDS brand whose remaining life exists primarily as a federal government desktop supplier. (Branding, therefore, would be critical to the future success of Packard Bell NEC.) Packard Bell NEC would have to proactively balance these brands among the commercial and home markets and begin to unify the marketing campaigns to attain efficiencies and maximize both the Packard Bell and NEC names. These are significant undertakings that will require substantial investments. |
