Packard Bell furloughs workers

A total of 600 workers will be "furloughed" without pay for a week at Packard Bell NEC, according to sources close to the company, a cost-cutting effort to minimize the impact of declining sales and perhaps an indicator of more serious problems at the consumer PC maker.

Packard Bell is being hammered by a general downturn in PC sales, as well as a decline in market share.

The unpaid time off will be staggered in stages, sources added. Starting Monday, 300 employees will go on leave next week; when they return, 300 different employees will be sent home without pay for another week.

Once one of the dominant vendors in the consumer space for low-cost computing, Packard Bell saw its market share erode over the past year due to increasing aggressiveness by larger top-tier PC vendors such as Compaq Computer and Hewlett-Packard in the retail arena.

Packard Bell and its corporate counterpart, NEC Computer Systems, also launched a "build-to-order" direct buying program last fall, causing a glitch in sales.

"Packard Bell is continuing to struggle," said Kevin Hause, an analyst at International Data Corporation, noting that the company has lost market share in the past year. "They're still working out the operational kinks with NEC Now (the direct sales program), which is not doing as well as they would have hoped.

"On the consumer side, they're coming under significant pressure from Compaq and HP in the retail channel," added Hause. "They used to own the low end of the retail channel, and now Compaq and HP are really pressuring them."

A company representative confirmed that employees from the retail manufacturing segment of the business would take unpaid time off but would not discuss the exact timing of the event.

Hause added that Packard Bell has suspended employees without pay in the past during seasonal slowdowns in sales.

Ironically, the news follows pronouncements from the company that it is gearing to plan a long-awaited IPO.