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Packard Bell and NEC Announce Merger Of Worldwide PC Operations - 06/1996

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SACRAMENTO, Calif. -- June 4, 1996 -- Packard Bell and NEC announced today that they have concluded a memorandum of understanding in which NEC's worldwide personal computer operations outside of Japan will merge into Packard Bell. Upon completion of the transaction, estimated to be valued at approximately $300 million, the name of the combined company will be changed to "Packard Bell NEC." The transaction is expected to be completed by July 1, 1996.

The transaction, which is the next logical step in the global alliance announced in August 1995 and February 1996 between Packard Bell, NEC and Groupe Bull, enables Packard Bell NEC to possess the industrial infrastructure to be a powerful force in the global economy.

Packard Bell NEC is the world's strongest PC company with a major presence in all channels of the PC market. The revenues for the first full year of operations for the new entity are projected to be $8 billion. According to 1995 Dataquest information, Packard Bell NEC would have been the largest PC company in the U.S. in 1995 with a 15.1 percent market share. Packard Bell NEC, together with NEC's PC-9800 series business in Japan, would have commanded 11.4 percent of the worldwide market share.

Mr. Beny Alagem will serve as chairman, chief executive officer and president of Packard Bell NEC, and will direct the operations of the company. Packard Bell NEC's nine-person board of directors will include five individuals appointed by the founding shareholders of Packard Bell, two appointments by NEC, and two appointments by Groupe Bull.

"Packard Bell is America's favorite computer. We have brought the most advanced, the best integrated, and the most affordable multimedia technologies to the greatest number of people in the U.S. and worldwide. Our passion has been to help all people improve their lifestyles through easy access to technology, regardless of their income or whether they are adults or children. Our mission for Packard Bell NEC is to deliver value-driven solutions that meet the information and technology needs of consumers, businesses, government, and educational institutions," stated Mr. Alagem.

The transaction, which has significant strategic, financial, marketing, sales and manufacturing benefits for the company and the industry, follows closely Packard Bell's acquisition of Zenith Data Systems from Groupe Bull in April 1996. Financially, it enables continued close working relationships with Packard Bell's two equity partners, NEC and Groupe Bull, in delivering quality products and strategies to lead the PC industry into the 21st century. This transaction does not change the current shareholding structure, with the founding shareholders of Packard Bell, NEC and Groupe Bull retaining their current equity positions. NEC's contribution will be paid in additional non-voting, preferred convertible stock.

In the marketing and sales arenas, Packard Bell NEC is more strongly positioned for growth and competition in new markets, channels and technologies. Packard Bell NEC will market three major brands -- Packard Bell, NEC and Zenith Data Systems. Packard Bell NEC's marketing and sales activities will extend worldwide immediately, with the exception of Asia-Pacific market sales activities, which will be handled by Packard Bell NEC Asia only for Packard Bell and Zenith Data Systems branded products. NEC branded products will be manufactured by Packard Bell NEC with NEC Asia-Pacific responsible for sales and marketing activities.

The transaction will add to the company's historical leadership in multimedia desktop PCs and monitors by infusing strong capabilities in PCs, notebooks, servers and R & D. NEC's engineering and technological expertise, ranging from electronic components and devices to telecommunications, further positions Packard Bell NEC for future multimedia technology development. NEC and Packard Bell NEC will collaborate in the development of notebooks and servers and integrate their PC server operations in the U.S. and Europe. In addition, Packard Bell NEC will aggressively pursue relationships with innovative, third party companies and individuals to explore, develop and market advanced software and technology for multimedia and Internet applications.

"Our goal is to be the leading and most respected global PC vendor in every segment of the industry, utilizing and optimizing the best technologies imaginable. Our combined infrastructure is ready to serve the home, corporate, and institutional markets. And Packard Bell NEC will do this more efficiently than ever. Together, we now have increased economies of scale, and enhanced capabilities for R & D, customer service, technical support, and quality assurance," said Alagem.

Since Packard Bell shipped its first computer in 1987, it has pioneered the mass marketing of PCs through the retail channel, and achieved a remarkable 44 percent share of the U.S. retail PC market. Packard Bell is already the number-one manufacturer of desktop PCs for the U.S. channel, according to Audits and Surveys, and fourth largest in worldwide sales, according to International Data Corporation. In the past year, strategic ventures with NEC and Groupe Bull have provided the company with added technological and financial strength, as the company has experienced significant growth in its major market sectors.

"Our commitment to world-class technological innovation, efficiency, quality and service is enhanced by NEC's management team and its track record for technological advances and engineering quality. With this and other recent initiatives, Packard Bell NEC is poised for phenomenal growth over the next five years -- so much so, that we anticipate a public offering of Packard Bell NEC stock within two years to ensure the capital is available to support that growth," said Alagem.

NEC will maintain its PC business in Japan. Packard Bell NEC also will market in Japan, where Packard Bell NEC will take advantage of NEC's infrastructure and logistical expertise. "The Packard Bell NEC name will stand for the best of both of our companies. We have great respect for Packard Bell's management, marketing and manufacturing capabilities," said Dr. H. Kaneko, NEC president. "We are very enthusiastic about our combined capabilities with Packard Bell worldwide, which will greatly expand our brand presence and long-term business opportunities. We look forward to supporting Mr. Alagem and his management team in making Packard Bell NEC the most influential player in all channels of the worldwide PC marketplace," stated Kaneko.

NEC, founded in 1899, is headquartered in Tokyo and had net sales of (U.S.) $41 billion in the fiscal year ended March 1996. NEC manufactures and markets a broad range of products, including communication systems, which extend from switching systems to cellular phones; computer systems, which extend from super computers to personal computers; and electronic devices, which extend from microprocessors to memory chips.

Groupe Bull continues to play a particularly important role in distributing Zenith Data Systems product throughout Europe. Packard Bell's Zenith Data Systems brand offers a full line of personal computer products ranging from high-performance servers and desktops to its award-winning line of notebook computers and wireless mobile products. Zenith Data Systems products are marketed to business, education and government. Earlier this year, Zenith Data Systems won the "Desktop V" contract with the Air Force, worth nearly $1 billion in sales revenue.

The three companies, Packard Bell, Groupe Bull and NEC, maintain a close strategic alliance. Prior to the announced transaction, Groupe Bull and NEC each held a 19.9 percent equity interest in Packard Bell, along with non-voting, convertible preferred stock, which they received in April 1996, in connection with NEC's additional capital investment and Groupe Bull's sale of Zenith Data Systems' PC operations to Packard Bell. Under the new alliance, NEC will maintain its 19.9 percent equity position and will receive additional non-voting, convertible, preferred shares.

Based in Sacramento, Calif., Packard Bell designs, manufactures and markets a broad range of PC-compatible desktop computers. The company's major manufacturing operations are in Sacramento, Calif. and Angers, France. For more information on the company regarding news releases, technical support contacts, product updates, etc., visit www.packardbell.com on the World Wide Web.