HCL Infosystems is phasing off its manufacturing business over the next three years as part of a company-wide restructuring that will lead to it focusing more on services and distribution verticals, reports Economic Times. The company has been struggling in the market and it had reported a 41.7% decline in its standalone net profit to Rs 1.48 crore for the quarter ended September 30, 2013 from Rs 2.54 crore from the same period last year. The standalone net sales of the firm declined by 32 per cent to Rs 1,593.48 crore in July-September this fiscal against Rs 2,341.68 crore in the same quarter of 2012-13 fiscal.
Hindustan Computers Ltd (HCL) was formed in 1976. It was a top PC brand in the country before losing ground to foreign players like Lenovo, HP and Dell. The HCL Group is a $ 6.3 billion enterprise comprising two listed companies listed — HCL Technologies and HCL Infosystems. HCL Infosystems has transferred its solutions, services and learning business to wholly owned subsidiaries — HCL Infotech, HCL Services, and HCL Learning. HCL Infosystems CEO and Managing Director Harsh Chitale said that the company will continue the PC distribution and after-sale service. “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 for some time,” he told PTI.
The PC business accounts for about 8% of HCL Infosystem’s overall revenues and has been under pressure for some time now as people started adopting new form factors such as tablets and phablets that are finding more takers. The company had then started distributing tablets and had even won a contract to manufacture 100,000 $35 tablets for the Indian government. However, this tender was cancelled as it failed to furnish a bank guarantee of Rs 60 crore. The company also had some disagreements over pricing with the government and allegedly HCL had listed some additional ‘unacceptable’ conditions to the government.
With PC business already struggling, this was a lost opportunity for the company to gain some publicity and find its way back to users hands. In the tablet market is faces stiff competition from the plethora of Chinese tablets, apart from the increasingly popular phablets.
Strange timing: The company’s exit from manufacturing is strange because the government has been encouraging Indian electronic companies to start manufacturing their products in India by offering tax deductions. It had passed a National Policy on Electronics for the same. That said, it is a possibility that company will now focus entirely on smart devices and try to manufacture them in India.
PC market dead?: Though HCL might not have been the biggest player in PC space here as far as volumes are concerned, its exit might be a sign of things to come. MNCs generally have tie-ups with international brands for getting PCs and a lot of smaller companies are moving away from desktops and shifting to buying laptops for its employees. Those that still use desktops prefer to source them from international companies in case of high-end PCs or build it themselves in case of entry-level devices.