OLIVETTI PLUGS IN NEW TECHNOLOGY

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IVREA, Italy-When Italians tune their TV sets to RAI 3 on Thursday nights, they see a news program starring the Ing. C. Olivetti & Co. workstation.

The Olivetti computer lab on news program "Tempo Reale" ("Real Time") reaches viewers by phone, video and e-mail, while pollsters support or challenge "Tempo" guests with on-line service information.

With mobile phones and multimedia, Olivetti is chasing a bigger stake of Europe's estimated $126 billion information technology equipment and software market. It's teetering on the brink of profits for the fourth straight year and ranks fifth in Europe's $22 billion PC market, with a 4.3% share, behind Compaq (with 14.6%) and IBM (12.1%).

"We expect Olivetti to shift resources from traditional computing to personal computing and networking, and telecommunications and multimedia," said Brian Pearce, a Paris-based analyst at information technology company Dataquest.

Later this month, Olivetti will announce that it broke even in 1994-or that it plunged into the red yet again. Olivetti lost $165 million in the first half of 1994, far worse than its previous $94 million first-half loss.

The slow recovery from recession in southern Europe, where Olivetti is strongest, delayed a return to profit, expected this year or next.

Olivetti will break state-run Telecom Italia's monopoly with a rival mobile phone service by the end of 1995. Italy is one of Europe's fastest-growing mobile phone markets-about $1 billion a year, expected to quintuple by 2000.

Olivetti won the license as the leader of consortium Omnitel Pronto Italia, with Bell Atlantic, Pacific Telesis Group and Mannesmann. Omnitel's state-of-the-art digital mobile phone system uses global system mobile communications technology, a feature older systems lack, allowing pan-European reach and use.

Omnitel is seeking an agency for the $25 million introduction and said it is considering Italian and international agencies.

Rival Telecom Italia countered Olivetti by tripling its ad budget to $80 million, mostly for institutional campaigns through Armando Testa, Turin. It will break a $12 million campaign this month by Publicis/FCB, Milan, for its own new GSM service.

Olivetti is racing into multimedia through subsidiary Olivetti Telemedia, coordinating 18 fledgling companies.

Olivetti and Bell Atlantic International last year formed joint venture Infostrada, offering corporate clients such telecommunications services as voice, video and data transmission. In September, Olivetti set up Advanced Telecommunications Modules to market low-cost multimedia networking for desktop PC users.

Telemedia, Milan, contributes just $320 million to Olivetti's $5.5 billion sales, "but we aim to double [the Telemedia sales] in two years," said Alberto De Benedetti, Telemedia's director of marketing and communications and a cousin of Olivetti CEO Carlo De Benedetti. Olivetti aims to develop business-to-business and consumer applications for on-line services and multimedia publishing, he said.

"In Italy, the doors for accessing the Internet are too narrow. We're working to make them wider."

In Italy, Olivetti started the Italia Online service in January with business daily Il Sole 24 Ore. The company is also developing Publiwindow, an interactive newspaper with Italy's leading daily Corriere della Sera. Publiwindow has 300 interactive terminals-expected to grow to 10,000 in four years-in shopping centers offering users information from horoscopes to classified ads. The project now has no ad support or sponsors.

In the U.K., Olivetti's Online Media is doing an interactive TV trial in 250 homes this year in Cambridge, tailoring TV programs for individual homes and offering banking and home shopping services.

"Multimedia also offers new ways to advertise," Alberto De Benedetti said. "Right now TV is the biggest seducer for advertisers, but soon, multimedia will become very seductive as well."

He is most enthusiastic about the marketing potential of CD-ROM. Telemedia focuses on prestigious CD-ROM titles; Mr. De Benedetti envisions packages combining entertainment and ads.

Olivetti is enhancing its home computer market appeal with its family-oriented DomusLife line of multimedia PCs complete with learning kits for languages, music composition and other subjects. A $6 million Italian campaign by Teaser, Milan, themed "The first PCs designed for you and your family," will go pan-European. Ads show comic actor Maurizio Nichetti illustrating the product's uses; in one he uses his own baby picture to demonstrate a digital photo album.

Analysts give Olivetti a fair chance of succeeding, noting that despite the years of red ink, the company is credited with being innovative. "They're a survivor," Dataquest's Mr. Pearce said.

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CORPORATE CLOSE-UP

Headquarters: Ivrea, Italy

1993 sales: $5.55 billion

1992 sales: $5.14 billion

Leadership: Carlo De Benedetti, CEO

Recent success: After a two-year decline, sales rose in 1993. Sales of PCs, fax machines and ink-jet printers jumped 45% in first half of 1994. Won lucrative mobile phone contract for Italy.

Challenges: Will report a loss in 1994 for fourth consecutive year but may break even in 1995 and return to profitability in 1996. Compete with Telecom Italia in mobile phone market. Expand multimedia products and services through joint-ventures.

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