Olivetti Pc Takes A Hard Market Drive

Even so, Bernhard Auer, chief executive, admits he will still need to reassure suppliers, resellers and customers - particularly those in Italy - about the long-term viability of the company following the sudden resignation last week of Alessandro Barberis, group chief executive of Piedmont International, OPCs parent holding company.

The former Digital Equipment executive says that despite the turbulence of the last nine months, when many were ready to write off Olivettis PC business, the company has a strong order book and is ready to do battle to regain its European market share. I am confident we will survive, he says.

 

Nevertheless, Barberis decision to resign, after finally securing the initial funding needed to ensure the survival of the Olivetti computer brand name, is a setback. He is understood to have been frustrated by the months it took to put the funding in place.

Olivetti spun off its loss-making PC business off in February to Piedmont, a holding company set up by Edward Gottesman, the London-based financier.

The spin-off came 18 months after the Italian conglomerate put the operations up for sale. But it was not until two weeks ago that a long-promised funding package materialised.

It comprises equity capital provided by Gottesmans Century private investment group and by Olivetti Group, which retains a 12 per cent stake in OPC, and a loan facility provided by Merrill Lynch.

The plan had been for Century and Olivetti together to provide a total of $40 million - half of the planned $80 million in equity - and for Merrill Lynch to provide a $100 million secured loan.

However, Merrill baulked when several prospective Italian investors pulled out of the financing at the last minute. As a result, Mr Gottesman was forced to increase the initial equity contribution to $65m while the loan facility was cut to $75m. After three-and-a-half months we really needed to have the finances done, said Mr Barberis shortly before he resigned. The delays had resulted in a cash crunch at the group. One positive side effect of the cashless time is that people are much more aware of the need to conserve cash and keep inventories to a minimum, says Mr Auer, who was brought in by the Olivetti group 18 months ago to spearhead the revival of the PC business, once a leader in Europe. Under Mr Auer, OPCs costs have been brought under control and the product portfolio has been pruned. This has involved jettisoning loss- making lines to focus on higher-margin products such as corporate PC servers - powerful PCs which manage groups of desktop PCs - and portable notebook PCs. Following a

strategic master plan commissioned by Mr Gottesman and completed by Booz Allen & Hamilton, the management consultants, Olivettis expensive direct sales force has been replaced by a network of 40 distributors in most of the main European markets. Partly as a result, the workforce has been cut from 3,000 to about 1,500. At the same time, OPC management -strengthened this week with the appointment of Mr Marc L