Packard Bell/NEC follows IBM out of US retail PC market

Following in the footsteps of IBM, Packard Bell/NEC announced it was getting out of the US computer retail market and would lay off 800 of its 1,100 US workers in Sacramento. The company’s PCs will continue to be sold in stores in Europe and the Far East. The intense competition in the US market and the heavy expenses associated with marketing in the retail channel is forcing big-name players like IBM and Packard Bell to move their consumer sales to more cost-efficient Web stores.

Packard Bell has lost more than $1 billion since NEC acquired the company in 1996. Packard Bell was one of the first companies to sell PCs at cutthroat prices. The company grew quickly into a top PC supplier. But the rapid growth caught up with Packard Bell and eventually the company became to bloated itself with overhead and marketing expenses to compete with the latest generation of low-end PC producers such as eMachines. The company also suffered from high manufacturing costs reducing its margins. And complaints about product quality also scared many customers away from the firm’s computers.

Packard Bell has been on "life support" for much of the past year, with NEC footing the bill for its losses. NEC will re-structure its US PC marketing strategy around selling computers under its own brand name. The Packard Bell brand will be kept alive in Europe where Group Bull of France owns a minority 12 per cent of the computer maker. Alain Couder, a former Bull executive who has headed Packard Bell for the past year and a half, will step down at the end of the year, along with 12 of the unit's 13 most senior executives.