HCL Infosystems to stop PC manufacturing

Indian PC vendor HCL Infosystems is planning to stop its PC manufacturing business. This will result into some job cut.

In order to improve margins and increase organisational efficiency, the company will instead focus on strengthening the services and distribution verticals, PTI reported.

The decision reflects the PC business globally. In the second quarter of 2013, PC shipments declined 11.4 percent to 75.6 million units, IDC said. The numbers reflect a market that is still struggling with the transition to touch-based systems running Windows 8 as well as justifying Ultrabook prices in the face of economic pressures and competition from tablets and other devices.

According to IDC, though countries outside of China were fairly in line with forecasts, with India maintaining an encouraging trajectory, overall PC shipments in the region fell slightly below forecast due to China.
“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 sometime in the future,” said HCL Infosystems CEO and managing director Harsh Chitale.

However, Chitale did not share specific timelines.

The PC business accounts for about 8 percent (around Rs 1,000 crore) of HCL Infosystem’s overall revenues.

In the last few years, most PC makers incurred losses due to the rupee’s fluctuation against other currencies, especially the US dollar. This has hurt the PC business in India as it is low-margin and almost 90-95 percent of the components are imported.

The company has 15,000 full-time employees, of which manufacturing comprises less than 3 percent. Of this, while some will immediately find opening in repair services, the remaining people who could lose their jobs would be less than the natural monthly attrition rate.

The move is a part of the firm’s restructuring efforts to focus on growth areas like services and distribution.

HCL Infosystems has transferred its solutions, services and learning business to wholly-owned subsidiaries — HCL Infotech, HCL Services, and HCL Learning.

The restructuring would help HCL to focus on growth engines like distribution and services which are seeing double digit growth, while helping fix the bleeding parts.

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