Ron Fuchs, a spokesman for Packard Bell NEC, said the cuts are very difficult for the company, but were necessary to make it competitive. "This is a very tough thing to do with our people. But as a company, it's the right thing to do."
Packard Bell is offering the laid-off employees severance packages and help finding new jobs, he said.
About 60 percent of Packard Bell's 5,000-person U.S. workforce is based in Sacramento, California, Fuchs said, "so 60 percent of the impact will probably be here in Sacramento."
Personnel will be selected on the basis of their job function and skill set, not on performance, Fuchs said.
Some of the job cuts are required to reduce duplication between Packard Bell NEC and NEC that remains from the merging of the companies, Fuchs said. Packard Bell NEC has about 7,000 employees worldwide.
European, Asian, and Latin American operations won't be affected. The cuts in the U.S. workforce will come from all Packard Bell NEC divisions and operations.
NEC acquired a stake in Packard Bell NEC in 1995 and now owns about 53 percent of the company. Despite the investment, Packard Bell's market share has been slipping steadily.
"They've had problems for quite a while," said Matt Sargent, an analyst with ZD Computer Intelligence. "Compaq has put a lot of pressure on them," making it very hard for Packard Bell NEC to control its niche, the low-priced market."
Packard Bell's market share dropped from 20.4 percent of retail desktop computer sales in August 1997 to just 9.1 percent in August 1998. "That's a very significant drop," Sargent added.
The job cut was needed because it will bring the company's operations in line with its market share, Sargent said, but added, "I don't think it's going to turn them around."
Alain Couder, president and chief executive of Packard Bell NEC, described the reason for the layoffs in a statement: "To meet our customers' needs in today's market, we need to become more competitive and deliver higher-quality products and services at lower cost and with fewer people. This means eliminating unnecessary costs, implementing better inventory management, and unfortunately, reducing staffing levels...It is a difficult course to take, but we will emerge from it a stronger, more disciplined and more focused company."
Couder replaced Packard Bell founder Beny Alagem, who resigned in September, two weeks after NEC acquired its controlling interest in the firm.