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Pity Poor Olivetti

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Olivetti OliPad

Does anyone remember Olivetti?  Are they still alive?   Personally, I thought they were dead, but I was in Italy last week and had to really stop and think when I saw huge billboard advertising in prime space at Linate airport, because not only do they appear to be still breathing, but they are audaciously advertising a new notepad (yes an Olivetti notepad!). So what's happening with Olivetti?

Here’s the deal.    Olivetti is one of Italy’s oldest and was at one point one of the largest technology companies, started in 1908 manufacturing typewriters (remember those?).    Even in the mid 1990s Olivetti was Europe’s second largest computer maker (after SiemensNixdorf).   Olivetti always had great designs, but also great innovation.  They invented the first mass-produced personal computer (the Programma 101); they were leaders in typewriters, mini-computers, fax machines, personal computers (the M24 IBM clone), cash registers, copiers, and even inkjet printers.   I remember myself trying to compete against Olivetti in the 1980s and not only did they have a vast range of products, massive distribution, but their salesmen were highly professional, tough and well-trained.  But as Intel moved to the faster processors, Olivetti failed to keep up, and they started to lose the plot, and design and ‘élan’ became more important than raw competitive edge.  By the 1990s the PC market became a dogfight, and Olivetti lost out to faster and mostly American competitors, and by the late 1990s it needed a government bailout to survive. 

In 1999 Olivetti then launched a, cheeky and hostile bid for Telecom Italia which was 7 times the size of Olivetti and surprisingly they won, but in 2003 after reorganisation Olivetti in turn became a subsidiary of Telecom Italia, and there it remains today.  Telecom Italia re-launched Olivetti in 2005 as a player in the ICT space, much of it legacy systems, and then last year Olivetti  launched the OliPad, its Android based notepad.

So how is Olivetti doing?  Well the answer is not very well.  It’s hard to recall just how big Olivetti was, but in 1990 their revenues were €8bn, but a sad entry on their website says their revenues today (well 2010) were €391 million, a shadow of its former self and employees are now only just over 1000.  The Telecom Italia parent is huge with consolidated revenues of €27bn in their latest accounts (2010)  and quite profitable, but Olivetti as a subsidiary makes an operating loss in every recent year and Olivetti's latest results for half year 2011 are no different 

Apparently Telecom Italia invested €200million for Olivetti to get back into the office products space, but with RIM, HP and many others closing or struggling in the fiercely competitive notepad market, you have to wonder what hope Olivetti has to succeed;  this is unfortunately, a legacy business going nowhere fast.   It’s a story of how fast markets can change and how challenging for management to firstly: recognise what’s happening (ability to objectively diagnose its reality); then make the right strategic choices to find future soures of profit (wisdom + luck); then execute quickly (organisation+ agility).  In Olivetti’s case unfortunately there was not enough of any of these and the OliPad as well as the restof Olivetti is frankly, a doomed venture.  Pity those still clinging to their livelihoods at Olivetti.  

Posted on: Friday, January 27, 2012