packard_bell.jpgTodays' revelation that Lenovo is negotiating to buy Packard Bell confirms the Chinese PC manufacturer's global ambitions, although this time the target is Europe, where Packard Bell claims to be the third largest vendor.

Packard Bell, like a lot of Europe's once high-flying PC makers, is not the force it used to be but it is still around and is heavily focused on the consumer markets these days. France is the only major European country where Packard Bell makes it into the top three PC vendors, according to Gartner, and it pulled out of the US PC market in 1999.

That the Packard Bell brand stubbornly refuses to die says a lot about the wonders of marketing and a certain misplaced brand loyalty on the part of consumers, I suspect.

If you deliberately tried to create one from scratch, it would be difficult to come up with a brand name that evokes so many historic US technology companies — Hewlett-Packard, Bell Laboratories, Pacific Bell — and yet has nothing to do with any of them. Indeed, if the name did not already exist and a Chinese computer company was brazen enough to call itself “Packard Bell” today, I'm pretty sure the lawyers would be on the case already.

But Packard Bell does exist and by buying the closely-held company, Lenovo can leverage Packard Bell's brand and distribution channels, which in some European countries are better established than those of Lenovo.

In its latest quarterly financial results, Lenovo boasts of strong sales in Germany, France and the UK, but Lenovo is not yet a top five brand in any of these markets, according to Gartner.

By contrast, Packard Bell is an established if hardly leading brand in several European and Latin American countries. I suspect Lenovo is thinking that in some countries it would make more sense to use Packard Bell's distribution network and perhaps even its brand rather than try to build a presence virtually  from scratch.

A quick history lesson follows. Packard Bell is today a Dutch registered company but its roots, along with most if its senior executives, are French. Readers of a certain age may remember that Bull, the computer company set up by the French state, abandoned PC manufacturing in 1996. It folded its PC manufacturing arm, Zenith Data Systems, into a joint venture Packard Bell-NEC, in which Bull retained a minority stake.

Bull sold out of the venture and NEC eventually followed suit after belatedly realising that that consumer PCs was not a good market to be in. Last year, the Japanese hi-tech giant sold Packard Bell to companies controlled by John Hui, the former owner of eMachines, the low-cost PC manufacturer that shot to brief fame in the dotcom boom. EMachines was recently acquired by Gateway, another former high-flier in the PC industry which has today fallen on hard times.

Lenovo was once rumoured to be interested in acquiring Gateway — again the rationale being to get its hand on a ready-made consumer PC brand with market share in the west — while Taiwan's Acer has previously been put forward as a potential buyer for Packard Bell.

Lenovo's proposed acquisition of Packard Bell follows its $1.75bn purchase of IBM's PC business in 2004, a bold move which attracted widespread praise.

Tomorrow, EngagingChina plans to run an interview with Lenovo's CEO Bill Amelio in which he discusses the Chinese company's challenges operating globally among other topics.


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