HCL to down shutters on PC business

Last Updated: Sat, Nov 16, 2013 05:57 hrs

The country's first home-grown personal computer (PC) company is bringing the curtain down on what is probably one of the most iconic PC brands India has ever seen.

HCL Infosystems Ltd, or Hindustan Computers Ltd (as HCL was known when it was incorporated in 1976), has decided to gradually "wind up" the business by mid-next year to focus on the company's distribution and services arm.

The PC business contributes eight per cent (about Rs 1,000 crore) to the company's overall revenues and has been under pressure for sometime, owing to new form factors such as tablets and phablets finding favour with consumers, as well as increased competition from foreign brands.

  • Hindustan Computers Ltd was formed in 1976 by Shiv Nadar,  Ajai Chowdhry, Arjun Malhotra and three others
  • The company, earlier the top PC brand in the country, lost ground to foreign players
  • Most PC brands are suffering globally due to emergence of tablets and smartphones
  • The company has also effected restructuring ,under which its solutions, services and learning segments will be transferred to three wholly owned subsidiaries

The company's PC arm has been on the block for about a year and the decision to phase it out may have been sparked by the fact that there weren't any takers for it. "Currently, there are only sellers of PC business in the market," chief executive Harsh Chitale told Business Standard. He added all global brands were struggling due to consumers increasingly opting for smartphones and tablets. The company will gradually wind up the business by the end of this financial year, even as it will continue to operate in the fast-selling tablet and phablet categories, he said.

HCL follows a June-to-July financial year. "We are not completely getting out of the PC space, as we will continue to distribute the products of companies such as Dell, as part of our distribution arm," Chitale said.

Most PC companies in India have incurred losses in the last couple of years due to the fact that this business is low-margin and 90-95 per cent of the components are imported. The rupee's fluctuation against other currencies has added to the woes of PC companies.

"There is a lot of sentiment involved with the HCL brand, there is no doubt about it," said Sumanta Mukherjee, lead information technology analyst at CyberMedia Research. He added the company's announcement was expected, given the direction in which it had been going for sometime. "There is a limit to how much resources you can pool in," he said, adding HCL had suffered because it did not have a global scale such as that of its rival brands and, therefore, couldn't match their prices. "The company's new road map, post the restructuring, looks promising," he said.

Meanwhile, the company reported a standalone net profit of Rs 1.48 crore for the quarter ended September, a 41.7 per cent fall against the corresponding period last year. Standalone net sales fell 32 per cent to Rs 1,593.48 crore. During the September quarter, the company incurred about Rs 60 crore of losses due to currency fluctuation in its PC and system integration business.

HCL, which has been posting disappointing numbers for a couple of years, also announced a restructuring exercise to divide the company into four smaller, focused units. "This has been done to bring down conflicts within different business units of the company," said Chitale.

In a statement, the company said its "solutions, services and learning stand transferred to the wholly-owned subsidiaries - HCL Infotech Ltd, HCL Services Ltd, and HCL Learning Ltd, respectively". The restructuring would aid the company to focus on growth engines - distribution and services - while helping in fix the bleeding parts, said Chitale.

The company's system integration business has also been under stress, with about Rs 700 crore of payments due, primarily from government departments.

More from Sify: