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Is HP Feeling The Heat?
By Dhaval Valia
 For several years HP has been the undisputed market leader in the consumer PC segment. But it seems the company is now feeling the heat of the tough competition from Acer and Dell.
Acer’s rise in the PC segment is exceptional. From being at the bottom of the PC table globally just a few years ago, it has climbed to the number two spot. In India too, the company is confident of reaching the second position by the end of this year. Dell has also made serious inroads in the consumer PC space over the last two years after it decided to take the channel route.
 While in terms of market share in the consumer space HP still has a substantial lead over both these rivals, it may be just a matter of time before its lead dwindles.
This I say based on the channel feedback I have been getting over the past few months. The primary reason for HP’s success has been its channel strategy and partner policies. However, over the last year, channel confidence in HP is wearing thin. Many leading sub-distributors and retailers who had been loyal to HP for years are moving away.
Take the case of the Raipur-based Priyanka Computer Services which had been an HP partner for 12 years. Last year Priyanka signed up with Dell as its MSA for Chhattisgarh. What’s more, within a year, Dell business has helped Priyanka to grow by almost 50 percent even in a slow economy.
HP’s share of Priyanka’s retail and sub-distribution business has come down from 70 percent to 20 percent, while that of Dell has increased from zero to 70 percent during the period.
Priyanka’s CEO, Kishore Makhija, thinks that HP is losing the channel plot. “HP has 5-6 sub-distributors in the region, all fighting over a small market, and this has led to overdistribution. There is no money in doing HP business.”
Priyanka is not the only loyal partner which has switched sides. Gujarat’s largest consumer PC sub-distributor, Care Office Equipment, has also changed its long-time alliance with HP in favor of Dell.
Earlier a strong HP partner, Care Office became a Dell MSA in 2007. Within two years, Dell’s business has grown substantially, and is expected to be more than 60 percent of the company’s projected turnover of Rs 160 crore in the current fiscal. This of course has come at the cost of HP.
Clearly, the core of HP’s problems is channel overcapacity leading to overdistribution and erosion of channel profitability. “We have decided to partner only with companies that give us good profits. Vendor loyalty doesn’t count,” states Makhija.
In my assessment, if things remain the way they are, HP is sure to lose its market leadership in the consumer PC space sooner rather than later. If it wants to reclaim and retain channel confidence, the company will have to reinvent its consumer PC strategy. Quickly. |