HCL Infosystems Ltd., India’s first home grown PC manufacturing company, with an impressive 37 year history is shutting down.
It was formed in the year 1976, when a bunch of passionate entrepreneurs : Shiv Nadar, Ajai Choudhary, Arjun Malhotra and three others joined hands to launch India’s first PC manufacturing company. In the 80s and early 90s, when there were no multinational brands in India, it was HCL’s personal computers which ruled the market.
It’s reach and penetration inside India can gauged from the fact that it has presence in 170 cities, 505 point of contacts covering over 4000 towns throughout India. It has presence in Africa, Middle East and South East Asia as well.
Over the years, its distribution network has grown to 93,000 outlets in 9000 towns all over India. At the time of writing this post, HCL Infosystems has manufacturing units in Chennai, Puducherry and Noida.
HCL Infosystems Managing Director Harsh Chitale said, “”We will be stopping manufacturing. My distribution today does lot of distribution of PCs of multiple brands… We will be in PC distribution and in after sales services but will not manufacture HCL branded products some time in the future,”
We have consulted industry veterans and have come up with three possible reasons HCL has decided to take this major step, which will change the landscape of Indian PC manufacturing for ever;
1) Competition from foreign brands & changing markets:
When the Indian economy opened up in late 90s and early 2000s, foreign brands such as HP, Dell and IBM brought in lots of competition which gradually destroyed HCL’s market inside India. And now, with rupees at an all time low against dollar, manufacturing PC is lot more difficult compared to last decade.
As upto 90% of components inside a computer are imported, it was becoming very difficult for HCL to survive in this low-margin market. Moreover, consumers now prefer tablets and phablets more than humble laptops and desktops, which has again created a remarkable shift in overall PC manufacturing market; a change which HCL is not ready to adapt.
B) Scalability:
HCL computer’s primary hunting ground have been only India, with few traces of sales in Africa and Middle East. This severely restricted scalability of HCL computers. Global brands such as HP and Dell invests millions of dollars into PC manufacturing because they know that their laptops and desktops will sell all over the world.
Whereas HCL couldn’t invest and innovate as their market was shrinking and not expanding. In the PC business, innovation is the key as technologies are changing at a break neck speed. HCL missed out on this aspect, and had no other option left.
Without such scalability and innovation, HCL cannot match the prices of other global brands, and the only option left is to quit.
C) Future Plans:
Within HCL Infosystems there are more than 15,000 employees, out of which manufacturing comprises only 3% of workforce. And in terms of revenues, PC manufacturing constitutes a paltry 8% (Rs 1000 crore) of overall revenues within HCL.
Hence, their focus had shifted long ago to other aspects of business such as distribution and after-sales service. In fact, HCL Infosystems had already transferred its solutions, services and learning businesses to other HCL subsidiaries namely HCL Infotech, HCL Services and HCL Learning.
On this issues, Chitale said, “The restructuring would help us focus on growth engines like distribution and services which are seeing double digit growth, while helping fix the bleeding parts.”
In the last quarter, HCL Infosystems posted net profits of Rs 1.48 crore, which was 41.7% less compared to last year. With total sales of such Rs 1593 crore in that quarter, which is again 32% less compared to last year, there was no opening in sight for HCL Infosystems.
No doubt the brand HCL has lots of sentiments attached, especially for loyal Indian customers. But, as they say, the only thing constant is change.
Will you miss HCL brand in future? What are your views on this latest development? Please share your feedback and comments right here!