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HP ramps up India investment amid plans to spin off PC unit

HP ramps up India investment amid plans to spin off PC unit
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First Published: Thu, Aug 25 2011. 11 26 PM IST
Updated: Thu, Aug 25 2011. 11 26 PM IST
New Delhi: Hewlett-Packard Co. (HP) is evaluating spinning off or selling its personal computer (PC) business globally, but the company’s India arm is, according to the head of its Personal Systems Group (PSG) Rajiv Srivastava, trying several things to regain its leadership position in the country.
“In terms of the total spend, the investment we are making in this quarter alone is more than what we have invested in the last two years. You can imagine the magnitude of the investment from this,” he said. Simultaneously, the company is also restructuring its partner and retail networks.
In just about a year’s time, HP has lost its leadership position in the country, and slipped to the number three position by units sold, behind Dell and Acer, according to market research firm Gartner Inc.
According to former employees of the company and analysts, the company’s fall in the Indian market is on account of several factors.
“There is a certain level of complacency that sets in when the company becomes too large; I think that was the case with HP as well,” said a former top official of the company who didn’t want to be identified.
The official added that in the consumer segment, where marketing plays a big role, the company didn’t spend as many “marketing dollars” as rivals such as Dell.
The official also added that the company’s products remained pricey while rivals reduced prices. This also affected their sales in the enterprise segment, where HP has been traditionally strong, this person added, because “when it comes to bulk buying, a company or a government department will buy a product which has lower prices.”
Srivastava said some of these were “half truths” and added that while price wasn’t a “show-stopper”, the investments he is now talking about in marketing “should have been made about a year and half ago.”
HP’s problems have been exacerbated by frequent changes at the top. Srivastava is the third person to head its PC business in two years. Then, there were issues with distribution as well, said an analyst.
According to Vishal Tripathi, principal research analyst with Gartner, changes in the company’s channel strategy dealt a big blow to its sales. “In April 2010, the company moved from a national to a zonal partner strategy and invited non-IT distributors in a bid to expand into small cities.”
Many of the new distributors were those in the telecom business and the strategy didn’t go down well with HP’s traditional partners and “there was a major backlash,” he added.
Srivastava admits that the company erred on this front. “It seemed right from a structural perspective, but the telecom business is different from the PC business. Some partners scaled up and some did not—this was one of the reasons for the market (share) loss.”
The company is now working on restructuring the partner network, he added.
Still, the Indian unit’s biggest challenge will be to maintain “business as usual” in the wake of last week’s global announcement.
On 18 August, Leo Apotheker, chief executive officer of HP said that the company will evaluate “strategic alternatives for its Personal Systems Group (PSG), including the exploration of the separation of its PC business into a separate company through a spin-off or other transaction.”
Srivastava, who has been travelling across the country meeting with customers and partners, said that the company is unlikely to face attrition or lose customers after last week’s global announcement.
surabhi.a@livemint.com
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First Published: Thu, Aug 25 2011. 11 26 PM IST
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