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Notebook Specialist Zenith Data Teams With PC Maker Packard Bell

June 23, 1993

LOS ANGELES (AP) _ Zenith Data Systems, a notebook computer specialist owned by France’s struggling Groupe Bull SA, announced an alliance Tuesday with Packard Bell, a leading maker of desktop personal computers.

The move is the second major consolidation in a month involving two of the nation’s 10 largest personal computer makers.

Zenith Data will pay an undisclosed sum for 19.9 percent of privately held Packard Bell. The companies will work together to design and build desktop PCs, but will continue to market products under separate brand names.

″We feel that genuinely this is a true win-win kind of deal,″ said Jacques Noels, chief executive of Zenith Data.

″It will strengthen both companies,″ said Packard Bell CEO Beny Alagem.

Packard Bell, based in suburban Los Angeles, has prospered by selling PCs through mass merchants like Silo stores. Its 1992 marketshare was 5.2 percent, according to International Data Corp., making it the fourth-largest PC vendor.

Zenith Data was No. 10 with a 2.0 percent share.

The first products from the alliance are expected as early as September, Noels said.

Zenith Data, based near Chicago, will supply private-label versions of its notebook and subnotebook PCs to Packard Bell, which is seeking to expand its product range.

As for distribution and marketing, ″The two companies are free to operate in any channels each one chooses,″ Alagem said.

The transaction underscores the ongoing consolidation among PC vendors, a trend that has been driven by price wars.

The largest deal came on May 26, when AST Research Inc., No. 8 in 1992 marketshare, agreed to buy the PC operation of No. 7 Tandy Corp. for $175 million.

Groupe Bull, which has not been profitable since 1988, lost $940 million in 1992. The French state-owned company announced in March that it would eliminate 3,000 jobs this year, partly due to vicious price competition.

France has approved the transaction involving Packard Bell, the companies said, while U.S. regulatory approval is expected soon.

Zenith Data won a victory last month when a judge rejected protests over a $724 million contract to supply 300,000 desktop computers for the Pentagon and several civilian agencies.

Noels said new products developed by the alliance may become part of that order. He denied claims that Zenith Data took the stake in Packard Bell in order to more easily obtain U.S. government contracts.

Last year, Packard Bell had $925 million in worldwide sales, and Alagem said it expected $1.2 billion this year before the alliance with Zenith Data. Packard Bell backed away from an attempt to offer stock to the public last year in disappointment over the proposed share price.

The French press reported in May that Bull, which is among 21 state-owned companies that France’s newly elected conservative government intends to privatize, was considering selling Zenith Data to Hewlett-Packard Co., AST Research Inc., NEC Corp. or Canon Inc. Rumors also have circulated that Packard Bell was for sale since the stock offering fell through last year.

Bull bought Zenith Data from television maker Zenith Electronics Corp. in 1989 for $610 million.

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