Today, NEC announced that it is closing its Sacramento, California, offices and laying off 2,080 of Packard Bell NEC's 2,600 employees, as previously reported. The division will be folded into a new entity, NEC Computers.
Michel Fromont, previously president of NEC Europe, was named CEO of NEC Computers. Fromont replaces Alain Couder, who said he would step down as part of the restructuring. Jeff Cooke will continue to head up NEC's North American commercial operations, the company said.
"What this really is, is a complete alignment with NEC's computer business globally," Cooke said. "The new company should be viewed as NEC Computer. Period."
NEC announced last week that it was dramatically overhauling its Packard Bell NEC subsidiary. Packard Bell was one of the earliest and most aggressive of the low-cost PC makers, but low-priced computers were a consistent drain on the group's bottom line. After investing more than $2 billion into Packard Bell NEC, NEC decided to pull the plug.
NEC has already largely cleared U.S. retail stores of Packard Bell-branded inventory, Cooke said. Packard Bell brand computers will still be sold in Europe.
"We did a slow transition," he said. "We're not going away from the consumer market at all. We're making the final decisions about how we touch and reach the consumer market."
The division will continue to sell PCs in the U.S. but under the NEC brand and only to the business market.
Despite consistent customer gripes about product quality, Packard Bell played an instrumental role in creating the retail and low-end PC markets, helping prices fall into previously unheard of territory.
The strategy, however, proved costly and the company lost money for several years. Packard Bell promised to reduce its 1998 losses, which were $650 million, to $100 million this year. The company missed this goal, though, as the losses will likely be in the range of $150 million, NEC has said.
"Going forward, we'll do differentiated products that don't slug it out at $299 and $399," Cooke said, citing NEC's all-in-one Z1 "microdesktop," as an example of an attractive product for the commercial or retail market.
"All I can say is that at the very low price points it's a tough business to make money in. We really want to focus where we have innovative products to differentiate us and where we can earn some money."
NEC still has some details left to work out in the restructuring. Packard Bell NEC is still looking for a manufacturing partner to outsource remaining products, and NEC is continuing to look for a buyer for its Utah service facility.