Print

Comment

Email

Digg

Del.icio.us

Reddit

Twitter

FY 09 was definitely not a year that HP India would like to remember fondly. The slowdown took an alarming toll on its toplinein rupee terms, the group revenue was almost flat; in dollar terms, it declined. Result: it was the worst performing group in the DQ Top 5 club. While the othersTatas at 26%, Wipro at 41%, Infosys at 31%, and even HCL at fared between average to outstanding, HP was left far behind in the race.

Paradoxically, HPs heterogeneity (otherwise a big plus in better times) largely accounted for the lukewarm performance. While some businesses like IT services and enterprise software recorded fabulous growth, the sharp drop in others like consumer PC and printing business completely negated the impact. Maybe in a slowdown year thats the price you have to pay for having a heterogeneous portfolioof the five groups Infosys and Wipro (primarily IT services) are mostly homogeneous, Tatas are more a conglomeration of disparate entities (difficult to establish a uniform heterogeneous streak there, though all are in IT services only) while HCL and HP are the two truly heterogeneous groups. And these two were the worst hit, since the good performance of one constituent gets offset by the not-so-good showing of another.

HPs operations during the year were organized into seven business segments: Enterprise Storage and Servers (ESS), HP Services (HPS), HP Software, the Personal Systems Group (PSG), the Imaging and Printing Group (IPG), HP Financial Services (HPFS) and Corporate Investments.

It was unfortunately not a great start for Neelam Dhawan, who rejoined HP India after her three-year stint as head of Microsoft India. She took over as the managing director of HP India in June, 2008, replacing CEO Balu Doraiswamy who moved on to become MD for Asia Pacific Japan and senior VP for HPs global technology solutions group (TSG). Though on a brighter note, within HP India, the TSG unit that she only headed (which contributed maximum to HPs revenues) was the silver lining. Within TSG, it was the IT services business that shonethe EDS acquisition paid off boosting the services topline by nearly 50%. Acquisitions seemingly did the trick for HP India: other than EDS, on the enterprise software front it were the Opsware and Tower Software acquisitions. There was little doubt that the EDS takeover placed HP in a stronger position to leverage the domestic market. While HP was already a force to reckon with in domestic IT services, it now gained in terms of new capabilities in manufacturing, transportation, PSUs, healthcare as well as infrastructure management and BPO. And we are not even counting the impact of MphasiS (which is an EDS company, and at present separately listed); though in FY 09, it was more for MphasiS that the HP-EDS brand equity worked well, and HP too is sure to benefit from the arrangement. The year even saw HP veteran Ganesh Ayyar taking over as the CEO of MphasiS.

RANK 5- HP India
(Revenue in Rs crore) CyberMedia Research                                                                                           DQ Estimates
While IT services, thanks to the EDS acquisition, paid off boosting the services topline by nearly 50%, the real pull down factor for HP India was the consumer segment
		If the revenues of MphasiS, an EDS company, is aggregated with HP, the overall group shows a healthy 28% topline growth
Neelam Dhawan, MD

TSGs growth at 33% (primarily because of the EDS acquisition) was however, defeated by the flat growth of two major groupsimaging & printing solutions and personal solutions (desktops and notebooks). TSG with 55% contribution continued to be HP Indias mainstay, while the pain areas for HP last year were PSG and IPG. Even though PSG accounted for nearly a quarter of its revenues and HP continued to retain its top spot in desktops and notebooks across all four quarters (according to IDC), the generally down consumer sentiment and the overall declining market were big dampeners. Particularly in the case of desktops, the market went sharply down, while in notebooks Dell started offering some competition.

Despite a slew of product launches that happened with an intense green touch, HP India struggled to sustain its growth in these areas, particularly on the consumer front. With the consumer business contributing nearly half of PSG revenues, it was almost impossible to escape the consequences of the decline. It was particularly after October that consumer sentiments took a dip for the worst, and the scenario didnt show much improvement by end of the fiscal.

Efforts were made though to halt the declining fortunes by launching newer products like Probooks (for SMBs), EliteBooks (for large enterprises), notebooks targeting women and CQ2000, the touch-smart PCs with QuickPlayer button. HP also undertook an inventory correction in OND and restructured PSG to ensure cross selling by the sales & marketing teams for both desktops and notebooks.

IPG (at 20%, the smallest of the three divisions) too was not immune from the negative market sentimentsmirroring the causes and symptoms afflicting PSG. Remedial measures adopted included a growing focus on managed printing services, large format printers, color printing and services like Snapfish. The financing scheme offered to resellers of both IPG and PSG by the HP Financial Services Group did provide some solace to the beleaguered partners. Incidentally, these financing options helped HP services too, as it enabled many SMBs to opt for the option to come into the services bandwagon. Last year was particularly interesting for HP Financial Services group (HPFS), which was started by Sameer Dhingra during his Compaq days. It got a big push due to inability of companies to shell out instant payments in the backdrop of an economic crisis. HPFS offers desktop PCs and other IT equipment on lease to SMBs, in addition to facilitating deployment of SAP business enterprise software, though it reports numbers globally. HPFS enabled per quarter payments of bundle of solutions bought from HP, last year. Amongst some big wins in India, HPFS won the financing and asset management services contract from Subhiksha last year.

On the enterprise software side, the information management and BI solutionswhich included the enterprise records management software that it acquired through its acquisition of Tower Software in fiscal 2008 and OpenCall solutions, which is a suite of carrier-grade software platformsalso helped a great deal. Though critics claim that while IBM is already moving ahead with a service as a product model, HP is still evaluating a customized portfolio. The proof of the pudding was in the eating-more than 30% growth in enterprise software.

Though the collaboration between HP services with enterprise storage & servers and HP software groups, as well as third-party system integrators and software and networking companies to bring solutions were very much there, HPSs synergy with IPG and PSG to provide managed print services, end user workplace services, and mobile workforce productivity solutions to enterprise customers were lackluster. One positive development was HPs seriousness on the green front. It did start scoring on the efficiency index with the introduction of products like blade servers with its green touch. Its e-waste strategy added a further push to its green focus.

Urvashi Kaul
urvashik@cybermedia.co.in

Page(s)   1