HCL Infosystems to stop manufacturing PCs
16 November 2013
HCL Infosystems has decided to exit the personal computer manufacturing business and focus more on IT services and hardware distribution.
The company has hived off its businesses into three subsidiaries in a bid to unlock value in profitable businesses as part of the turnaround strategy for the loss-making ones.
''Our Enterprise Solutions, now part of HCL Infotech Ltd business, faced headwinds due to exchange rate volatility of as high as 15 per cent during the quarter which resulted in a large exchange rate loss and also impacted gross margins of the hardware solutions business. This business also continued to be challenged with project delays and overdue receivables with many public sector customers. In view of such headwinds, this business continued to be extremely selective in pursuit of new deals.
''Our Scheme of Arrangement on Restructuring has become effective from 1st Nov 2013. Under the restructured organisation, the company's businesses of 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 now enable us to have undivided focus and attention on our key growth engines – distribution and services business,'' Harsh Chitale, chief executive and managing director of HCL Infosystems Limited, said.
He said manufacturing of PC has become less and less a part of the company's business and that the hardware manufacturing story has struggled as there was no cost and competitive advantage in manufacturing hardware in our country.
At the same time, the company also continued to diversify its product portfolio to non-telecom products with the signing up of many leading brands such as HP, Microsoft, Delta, Lenovo, Karbonn Tablets, Lava Tablets, etc during the quarter.
''Rather, we will do what we are good at. We are definitely going to continue to be a dominant distributor of PCs,'' he added.
System integration and solutions business has been brought under a wholly owned subsidiary HCL Infotech Ltd and IT services, including infrastructure management has been brought under another subsidiary called HCL Services Ltd. In addition, there is HCL Learning Ltd, which is in the education space.
''We will be able to decide which of these would be our growth engines of future and which of these are going to be less and less of focus going forward. In the near to midterm, I can see distribution and services becoming the two pillars of growth,'' Chitale said.
HCL Infosystems has reported a 41.7 per cent decline in its standalone net profit at Rs 1.48 crore for the quarter ended September 30, 2013. The company had posted a net profit of Rs 2.54 crore in the corresponding quarter last year.