A couple of local computer industry veterans,Lap Shun “John” Hui and Wayne Inouye,may come out of retirement to take on Europe.
Hui, who sold eMachines Inc. to Irvine-based Gateway Inc. in 2003, is said to be interested in buying Packard Bell’s European unit, which is part of Tokyo-based NEC Corp., according to a recent report in Nihon Keizai Shimbun, a Japanese daily.
NEC has been in negotiations with Hui and could sell as early as August, the report said. The sale could be as much as $87 million.
There’s also speculation that Inouye, the former chief executive at Gateway and colleague of Hui, might be the choice for chief executive at Packard Bell, said Rob Enderle, principal analyst with the Enderle Group in San Jose.
Inouye was chief executive at eMachines under Hui’s ownership for nearly two years. A potential roadblock to the chief executive talk: Inouye may not be able to take a job in the computer industry because of a non-compete contract from his stint at Gateway.
Hui didn’t comment on the possible sale. He did post on his Web site a Wall Street Journal article discussing the Packard Bell speculation. Inouye couldn’t be reached for comment.
Hui made a name for himself in the U.S. computer industry in 2002, when he invested about $160 million in then-struggling eMachines and took the company private. Inouye had been chief executive since 2001.
After the 2002 acquisition, Inouye said he talked with Hui nearly every day about eMachines’ progress.
Hui is the cofounder of South Korea’s Korea Data Systems, one of two companies that together started eMachines in 1998.
Hui got $290 million in cash and stock from his sale to Gateway. The Chinese immigrant gave more than half of his $129 million in profits from the sale to eMachines’ 140 employees, according to the Orange County Register.
Hui still owned about 5% of Gateway, according to a recent regulatory filing.
Gateway founder Ted Waitt is the company’s biggest shareholder.
Gateway’s stock recently hit an all-time low. Investors are fretting about several issues at the computer maker, including its small size relative to bigger competitors, a lack of a permanent chief executive and the general downturn for technology stocks.
Enderle said Hui could face challenges with Packard Bell in Europe.
Packard Bell, which backed out of the U.S. market in 2000, has built a reputation as a maker of high-quality computers in Europe.
But Hui’s experience at eMachines was with low-end computer sales. EMachines shook up the industry in the late 1990s with its cheap, bare-bones computers.
“It’s on the other end of the spectrum,” Enderle said.
Inouye’s turnaround of eMachines also boosted his resume,but with a focus on low-end computers.
“The problem has to do with his focus on the wrong end of the market,” Enderle said. “He would run into some of the same problems he ran into at Gateway.”
After Hui sold eMachines to Gateway, Inouye took over as Gateway chief executive in early 2004. He led the company to profitability in 2005. Gateway previously posted five years of losses.
But Inouye left Gateway earlier this year after a disappointing fourth quarter.
Analysts said Inouye did a great job of strengthening Gateway’s retail sales, just as he did with eMachines. But they also said he failed in his bid to reverse sinking sales to business and online customers.
Another rumored chief executive possibility if Hui buys Packard Bell: Steve Ward, a former IBM Corp. executive who became chief executive of Lenovo Group Ltd., a Chinese company, in 2004.
Ward stepped down in December and was replaced by William Amelio, one of Dell Inc.’s senior executives for Asia.
But Ward could face difficulties heading Packard Bell, Enderle said. His former employer Lenovo focuses on corporate sales, and Ward could be challenged by the retail market.
Europe is a flagging market for technology companies and computer makers in particular these days, according to a recent report by Framingham, Mass.-based IDC Research Inc.
“Slowing demand in Western Europe with the additional impact of the World Cup and increased inventory levels in Q1 contributed to constrain second quarter sales,” the report said. “Growth of both desktops and portables declined notably from prior quarters.”
Could Packard Bell make a return to the U.S.?
Enderle is doubtful.
Packard Bell’s name was associated with poor quality when NEC pulled the plug on the brand in the U.S. Those negative sentiments won’t go away soon.
“It would be a long shot,” Enderle said.
Packard Bell brings in about $1.1 billion in business and consumer sales annually in Europe, according to Nihon Keizai Shimbun. But NEC split its business PC operations from Packard Bell in 2005 after suffering losses. The company employs about 800 workers.
If it sells Packard Bell, NEC would exit the European computer market entirely to concentrate on the Asia-Pacific region.
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Ingram Sees Solid Demand Globally
Technology bellwether Ingram Micro Inc. said last week it continued to see solid global demand in the second quarter, though there was some weakness in prices.
Santa Ana-based Ingram, the world’s largest distributor of technology products, said sales in the period rose 8% to $7.4 billion,its biggest second quarter ever.
Sales were higher than Wall Street forecasts of $7.3 billion, according to Thomson Financial.
Net income rose 29% to $53.8 million, versus a year ago, in line with expectations. Ingram’s profit last year was impacted by costs associated with its buy of Tech Pacific, among other one-time charges.
“Demand continues to be solid throughout the world, with competitive pressures affecting pricing in certain markets,” said Chief Executive Gregory Spierkel, in a release.
Ingram said the company’s European sales were down slightly to $3.4 billion in the second quarter, compared to a year earlier. Europe made up about 32% of the company’s total sales in the quarter.
“The market environment in Europe was challenging during the quarter, as reported by many of our peers, but we were able to mitigate single-market obstacles through our diversified global footprint and expansion into adjacencies,” Spierkel said.
Revenue in North America was up 14% to $3.3 billion in the period, versus a year earlier. The region accounted for about 45% of the company’s sales in the quarter.
In Ingram’s Asia-Pacific region, revenue rose 12% to $1.3 billion. Asia-Pacific made up about 18% of the company’s total sales.
The company’s Latin American sales were $332 million, up 10% from a year earlier. Latin America accounted for 5% of Ingram’s sales in the quarter.
Ingram said it expects sales of $7.3 billion to $7.5 billion in the third quarter, with net income forecast to be $49 million to $56 million.
,Mike Mason
