Packard Bell Strategy Withstanding Slump

The personal computer industry has been battered recently by flattening demand, intense competition and fierce price wars, resulting in huge losses even at industry stalwarts International Business Machines and Compaq Computer.

But while many other computer makers have been restructuring and retrenching, Packard Bell Electronics in Chatsworth has been quietly gaining ground.

Industry analysts estimate that Packard Bell’s sales have been growing five times faster than the industry average. In the six years since it branched into personal computers, Packard Bell has captured 4% of the U.S. market, to rank among the top domestic PC makers as measured by the number of units shipped.

The privately held company is related to the old Packard Bell that made radios and televisions only by its name, which the current owners acquired in late 1985.

The company doesn’t make public its revenue or profit figures, but industry analysts estimate that shipments of Packard Bell’s computers--which retail for as little as $800 on up to $5,000, depending on the amount of power desired--topped $700 million in 1991.

The rapid rise of Packard Bell has been attributed to its strategy of selling its low-priced IBM-compatible machines through channels previously ignored by computer makers--from mass merchants such as Sears to warehouse discounters such as Price Club.

Packard Bell is also one of a breed of young, aggressive companies that has helped demystify computers by treating PCs as commodities, packaged complete with disk drives, software and modem and ready to operate right out of the box.

Packard Bell created “a blueprint for retail success,” said Roger Lanctot, research director at Personal Technology Research in Waltham, Mass.

But Packard Bell now faces a bigger challenge. Mass merchants and discounters, not content to rely on just one supplier, have begun selling many types of computers, including brand names such as Epson American, Leading Technology and AST Research. And more computer makers are following the trend toward lower-priced, easy-to-use products.

Even giant IBM has infiltrated the mass merchants; last year, it also introduced a new, simplified desktop computer. “What we expect to continue in the ‘90s is an explosion of retail channels to meet buyers’ needs,” said Winnie Briney, an IBM vice president of product marketing. In keeping with that, she said, IBM’s strategy is to make its PCs “easier to buy, easier to understand and easier to get serviced.”

In addition to growing competition, Packard Bell is up against what analysts predict will be another bruising year for computer makers, culminating in an industrywide consolidation.

How does Packard Bell hope to stay a step ahead?

Chief Executive Beny Alagem, 39, said he plans to stick with his strategy of making a PC purchase as simple as possible for consumers who are increasingly confronted with a bewildering array of choices. And he hopes to capture more business by extending that concept to new products.

“If you keep looking back to see where the next competitor is, your speed and pace will slow,” Alagem said. “But if there’s a shift in the consumer, then we want to shift.”

In October, Packard Bell introduced a local area network--a group of computers that share information--that differs from other such networks in that it’s essentially ready to hook up and use right out of the box.

An entry-level system with one file server, three workstations, a printer and software sells for less than $15,000, a price the company hopes will appeal to small businesses.

Also in October, Packard Bell unveiled a new version of its top-of-the-line PC that can be upgraded by simply plugging in a new central processing unit--the “brains” that control a computer’s various functions.

That means an owner can get the equivalent of a new computer for as little as $300.

“Basically, we made a non-obsolete computer,” Alagem said.

That According to recent surveys, Packard Bell’s customers give the computer maker high marks. Verity Group, a market research firm in Diamond Bar, found in a nationwide survey of more than 5,000 desktop computer owners conducted from November, 1990, to November, 1991, that Packard Bell ranked the highest in customer satisfaction.

“Wherever the consumer will buy, that’s where we will make our product available,” Alagem said.