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NEC Says Losses at Packard Bell Unit Mounting, More Job Cuts May Be Needed
By Peter Poole-Wilson with reporting from Miki Takeyama and Yoshifumi Takemoto
NEC Says Packard Bell Losses Heavier Than Expected (Update2)
(Adds share performance in last paragraph.)
Tokyo, June 3 (Bloomberg) -- NEC Corp., Japan's largest
maker of personal computers and microchips, said its unprofitable
U.S. subsidiary Packard Bell NEC Inc. lost more money than
expected in April and May, which may prompt the unit to cut more
jobs.
Sacramento, California-based Packard Bell was the biggest
drag on NEC's performance in the year ended March 31, as slumping
sales and the cost of reorganization at the subsidiary caused NEC
a record 157.9 billion yen ($1.29 billion) loss.
NEC cut Packard Bell's workforce by half and reduced its
number of computer models by three quarters last year in a bid to
shrink the subsidiary's losses to less than $100 million in 1999.
Yet Packard Bell's performance has been sliding since April
because of intensified price competition in PCs in the U.S., NEC
President Kouji Nishigaki told Bloomberg News.
''Packard Bell's performance is deteriorating because of
aggressive price cutting in April and May,'' said Nishigaki ''It
may become necessary to bolster operations by concentrating even
more closely on high-end products and further job elimination.''
Nishigaki indicated NEC was prepared to sell, merge or close
the unit unless its performance improved.
If Packard Bell fails to control its red ink, ''we'll merge
it with our other U.S. subsidiaries,'' he said. ''If things don't
work out in the end, there's nothing to do but get out.''
Tokyo-based NEC, which spent $225 million last July to raise
its stake in Packard Bell to 53 percent, last year slashed the
unit's workforce to 3,000 from 6,000, reduced its product range
and cut its sales channels by two thirds in a move to limit
losses at the subsidiary.
NEC, which first bought a 20 percent stake in Packard Bell
in 1995, took an 80 billion yen charge in the year ended March 31
to restructure the subsidiary. The subsidiary's sales were
reflected in NEC's group results for the first time in the year
just ended.
Packard Bell's losses swelled to $500 million in 1998 from
$487 million in 1997 as revenue fell 28 percent to $2.8 billion
from $3.897 billion.
Packard Bell has lost market share to larger rivals such as
Dell Computer Corp. and Hewlett-Packard Co., which have been able
to slash prices to lure buyers because their production costs are
lower.
Intensified price cutting since April, with low-end PCs
selling for as little as $399, makes it increasingly tough for
Packard Bell to succeed in narrowing its losses to the $80
million NEC targets for 1999, Nishigaki said.
''We'd like to bring about recovery from the July-September
quarter onwards, and keep the red ink to within $100 million
somehow or other,'' said Nishigaki, who replaced Hisashi Kaneko
as president in March after NEC forecast a record loss |
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