Business Week International International Business: ITALY
OLIVETTI BETS ON DE BENEDETTI II (int'l edition)
Typically for Italy, it's family to the rescue. Carlo De Benedetti, the 60-year-old chairman and CEO of Olivetti, is looking to son Marco, 33, to help turn things around. While Olivetti's core computer business is hurting, Marco is off and running with a spin-off of the company's scattered media ventures called Olivetti Telemedia. The goal: Use the new company to make Olivetti one of the Continent's hottest players in multimedia.
Olivetti desperately needs a fresh start. Its computer business is losing ground to industry heavies such as Compaq, Hewlett-Packard, and Germany's Vobis Microcomputer. Net losses in 1994 could run as high as $340 million, capping four straight years of red ink. A new push into mobile telecommunications, with a commanding 36% stake in Italy's Omnitel-Pronto Italia, the country's first private cellular operator, is hardly enough to make up for the lagging performance in computers. Olivetti's stock, meanwhile, has fallen by 20% since January.
Looking for new growth, Chairman De Benedetti created Milan-based Telemedia last July. The new company has sales of only $350 million, vs. the parent company's $5.6 billion. But Telemedia's involvement in online services, desktop videoconferencing, and software for sophisticated networks could help revitalize Olivetti.
BIG FISH. As head of Telemedia, Marco has more going for him than his name. A product of American and European business culture, Marco graduated from Wesleyan University and did a one-year stint at Procter & Gamble Co. before getting an MBA at Wharton. The next two years were spent in nonstop dealmaking at New York's Wasserstein Perella, where he worked on the Time Warner and RJR Nabisco mergers. "It was a fun time," exclaims the boyish executive.
Dealmaker Marco's trump card: leveraging Olivetti's powerful presence across Europe to attract partners with hot technology--and deep pockets. Some big fish are already biting. Olivetti was the only computer group chosen by Microsoft Corp. when it recently selected five global development partners for interactive multimedia software based on its new Windows NT operating system. That stands to strengthen Olivetti's position in cutting-edge consumer products such as video-on-demand.
In another promising deal, Telemedia linked up with Hughes Network System Corp. to offer digital satellite telecommunications services to big corporate customers in Europe. De Benedetti is betting that companies will prefer dealing with a single telecom operator to negotiating Europe's maze of state-run phone companies. Although Hughes faces tough competition in the emerging digital market from General Electric, AT&T, and Nippon Telegraph & Telephone, none has European partners. "Olivetti's broad customer base in Europe will help it stack up against the opposition," says Kenn D. Walters, senior consultant at BIS Strategic Decisions in Munich.
De Benedetti plans to go after market niches where Olivetti is already a strong player. He aims to develop key business applications for the Internet, such as payment services, that will tap Olivetti's expertise in point-of-sales terminals and smart cards. "We have the right critical mass in people, resources, and revenues to allow us to do this," says De Benedetti. Other key areas: security systems and online services.
De Benedetti hopes to rush to the market high-quality videoconferencing for PCs--at prices within almost everyone's reach. Telemedia now directs Olivetti's research labs in the middle of Britain's Cambridge University, where scientists confer by video with each other using Olivetti's broadband technology. The system's tiny desktop-mounted microphones and cameras deliver crisp, flowing images and CD-quality sound. ATM Ltd., a Cambridge company controlled by Telemedia, is planning to market the first low-cost versions of the system this March.
Can Olivetti remake itself? Revenues from Telemedia's operations have to start taking off soon if Olivetti is to avoid the fate of other European computer makers, which have turned to major strategic partners to survive. "The problem is that many multimedia markets may be for the late '90s rather than the mid '90s," worries Peter Knox, computer analyst at UBS Philips & Drew, "and Olivetti needs help now." That means the new father-son team has a lot to do in very little time.By John Rossant and Gail Edmondson in Milan