***** For Immediate Use November 10, 1999
NEC to Reorganize and Refocus Its Global Computer and Server Business
NEC Corporation (NEC) (NASDAQ: NIPNY) announced today that it will reorganize and refocus its worldwide personal computer and server business globally to enhance profitability.
- Restructuring of North American Operation
- Outsourcing of manufacturing/production operations to reduce its overhead (G&A) costs, starting next year, which will result in the closure of the Sacramento facility, owned by Packard Bell NEC, Inc. (PBN).
- Outsourcing of service operations and sales of PBN's call center operations at Magna, Utah.
- Reduction of approximately 80 percent of PBN's current base of 2,600 employees.
- Transfer of PBN's NEC branded personal computer business, mainly targeted at corporate customers, to NEC Computers, Inc., a newly established subsidiary of Packard Bell NEC Europe B.V. (PBNE), which will aim at becoming profitable in its fiscal year 2000.
- Withdraw from Packard Bell brand personal computer operation in the U.S. (while continuing it in Europe and other regions)
- Current PBN will continue to provide service and support for its discontinuing Packard Bell branded products.
- World-wide reorganization
- European business under PBNE, which continues to be profitable and growing, assumes leadership role for all global personal computer and server business outside of Japan and China. Current PBN's NEC brand personal computer business will transfer to a newly established subsidiary of PBNE. Also NEC's personal computer and server business in Asia and Pacific region will be transferred to local subsidiaries under PBNE mainly indirect sales operations and existing NEC's subsidiaries will continuously enhance direct system integration business including servers from January 2000 accordingly.
By reflecting this change, PBNE will be renamed "NEC Computers International B.V. (NEC-CI). This means a single company NEC-CI will lead the worldwide personal computer and server business.
NEC-CI will further enhance its competitiveness and profitability of its core business through its uniformed business platform and NEC's supreme technologies.
As a part of NEC's global strategy focusing on internet business, NEC-CI, as a personal computer and server company, will cooperate, on a worldwide basis, with other NEC companies, such as US based NEC Systems, Inc. and ISVs (Independent Software Vendor) as well to provide computer platforms and to bring customer base.
NEC-CI's business plan for its fiscal year 2000 is now under development.
NEC has operated its personal computer and server business through PBN in the U.S. and PBNE in Europe and Asia-Pacific. PBNE has continuously been profitable in double digit growth and also it is rapidly expanding its server business into the corporate field. On the other hand, PBN, while it has reduced its losses significantly, still struggling in a fiercely competitive marketplace.
Last year, PBN took a series of actions aiming at a turnaround of PBN's business, which includes management changes and significant fixed cost reduction, which lead to major layoffs, product focus, improvement in production and enhancement of service. The company's 1999 financial plan called for reducing its losses to $100m and it is on track to lose $150m ($130m if including European operations). Accordingly, NEC has decided to take even more large-sized restructuring, which would substantially scale back its current North American operations.
At the same time, NEC decided to reorganize and consolidate its world-wide personal computer and server operations to contribute its company-wide capabilities of system integration and services toward the Internet fields.
Koji Nishigaki, President of NEC Corporation stated, "we are confident that with these actions, along with our corporate strategy of focusing all its strength around the Internet fields, we can provide corporate customers worldwide, i.e. U.S., Europe, Asia and Japan, with products and technologies they really need, in a very efficient manner and provide various solutions, through strengthened teamwork with other NEC's SI and software companies."
Impact on NEC financials from these actions are already built in the recently announced projection for the fiscal 1999 (as part of extraordinary losses of total 100bn yen). The losses will be offset by gain from sales of assets and will not change NEC's consolidated financial projection.
- CAUTIONARY STATEMENT:
- The above forecasts are forward-looking statements involving risks and uncertainties. The important factors that could cause actual results to differ materially from such statements include, but are not limited to, general economic conditions in NEC's markets, which are primarily Japan, North America, Asia and Europe; demand for, and competitive pricing pressure on, NEC's products in the marketplace; NEC's ability to continue to win acceptance of its products in these highly competitive markets; and movements of currency exchange rates, particularly the rate between the yen and the U.S. dollar in which NEC makes significant sales; and NEC's ability to deal with the impact of the Year 2000 issues.