ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, February 8, 1996 TAG: 9602080062
SECTION: BUSINESS PAGE: C-6 EDITION: METRO
DATELINE: SACRAMENTO, CALIF.
SOURCE: Bloomberg Business News
Packard Bell Electronics Inc. has agreed to acquire Zenith Data Systems, making it the U.S. leader in unit shipments of personal computers.
France's Groupe Bull, parent of Zenith Data, and Japan's NEC Corp. will retain 19.9 percent stakes in Packard Bell and invest more than $650 million in the computer maker, bolstering its flagging finances.
The move also gives Packard Bell access to the profitable corporate and international markets, where Zenith Data is strong. Sacramento, Calif.-based Packard Bell has been losing ground in the home PC market, the least profitable segment for computer sales. That has made it difficult to maintain cash flow and raise capital for expansion.
``They were in a precarious and weakened position because they were so dependent on the U.S. home market,'' said analyst Bruce Stephen of market research firm International Data Corp. ``This gets them back in the game.''
NEC will invest $283 million in cash in Packard Bell. Bull's investment consists of folding the Zenith Data unit into the merged company, valuing Zenith at more than $367 million, the companies said.
When the transaction is completed, Packard Bell will command 13 percent of the U.S. market, surpassing Compaq Computer Corp.'s 12.2 percent. The combined company will retain the Packard Bell name and will have more than $5.5 billion in annual revenue.
The transaction, to be completed by the end of the month, takes the unprofitable Buffalo Grove, Ill.-based Zenith Data off Bull's hands. It also helps NEC gain a bigger share of the worldwide PC market.
With the cash from NEC and assets from Bull, Packard Bell will strengthen the company's balance sheet and have ``resources for continuous development of advanced multimedia technology for the company's core home PC line,'' the companies said. Packard Bell also will use the money for international development.
NEC President Hisashi Kaneko said he was aware that Packard Bell needed the extra cash. He said the money will help pay for a PC plant under construction in Sacramento.
Packard Bell "is buying a way to get to the next level in this business,'' said analyst Scott Miller of Dataquest. ``There is still a lot of work to do to make Packard Bell a global powerhouse, but this gives it the infrastructure to go in and build it up.''
``The merger is a necessity and will probably mark the first of the big consolidations in the PC industry,'' said Thierry Breton, executive director of Bull. Intense competition in PCs puts smaller players at a disadvantage when buying components and selling products, he said.
NEC, the world's fifth-largest PC maker, paid $170 million for its Packard Bell stake seven months ago. NEC also has had a piece of Zenith Data through its 17 percent stake in Bull.
LENGTH: Medium: 58 linesby CNB