Once an also-ran, it is now a front-runner in the Indian computer market. CEO Ganesh Ayyar's next stop: switchover to HP's net-centric growth model.

By  Ashutosh Sinha

Last month, when Hewlett-Packard's chief executive, Carly Fiorina, reported a 39 per cent jump in earnings per share for the third quarter ended July 31, Wall Street shrugged its shoulders. Unhappy that part of the earnings gain had come from non-operational income, the market slammed the hardware major's stock.

Ganesh Ayyar, Hewlett Packard's pointman in India, has no such things to worry about. For two reasons: One, the Indian operations are fully owned by the Palo Alto-based parent, so there are no pesky shareholders to appease. And two, Ayyar's track record of past two years has been nothing short of spectacular. He has succeeded in transforming an also-ran computer company into the fastest growing player in the Indian market.

During the fiscal ended March 31, 2000, Hewlett Packard India (HPI) shipped 70,356 desktop personal computers compared to the bare 26,674 it did the previous year. As a result, while the personal computer market grew by nearly 39 per cent to 1.12 million sets, HPI scorched ahead with a 164 per cent growth. Its market share jumped from 3.30 per cent to 6.25 per cent, and sales ballooned to Rs 1,238 crore from Rs 699 crore the year before. Says Ayyar, the company's 38-year-old President: ''Our focus is the customer, and that has helped us grow the way we have.''

Getting its act together

Until barely two years ago, HPI was mired in problems. Its imported PCs were proving to be uncompetitive versus those of Indian competitors, who locally assembled their boxes. It took 19 days for goods shipped from Singapore to arrive in India, besides a few more days for Customs clearance. The company had just one warehouse in Mumbai, requiring the payment of sales tax every time PCs left the warehouse, an inter-state sales tax whenever the PCs were shipped out of Maharashtra and, finally, another tax at the point of sale. Recalls Anoop Khandelwal, 43, Logistics Services Manager, HPI: ''Managing logistics was proving to be a nightmare.''

As a first step, HPI commissioned an assembly unit in Bangalore in February, 1999. The objective was to ship out PCs that cost as little as any other local brand. Six more warehouses were set up in key markets, including Delhi and Bangalore, to cut delivery lead times and save on taxes.

To ensure that it doesn't fall into an inventory trap, HPI targets to ship 95 per cent of new inventory within 10 days of its arrival. It has even managed to sensitise the Customs authority to its goal of clearing shipments within 96 hours of their landing.

Similarly, better inventory management has allowed supplies to be shipped by sea instead of air. The result: It saves $1 per unit, and it imports nearly 80 containers a month. Points out Khandelwal: ''Since other differentiators are shrinking, the company which delivers in the least time will emerge as the winner.''

Getting a grip on its supply chain is helping HPI price its PCs aggressively. The brio range of PCs meant for retail consumers was launched at a starting price of Rs 39,990. On the commercial front, the company's Pavilion range aimed at small and medium enterprises captured the price point beginning Rs 49,000. The high-end Vectra PCs were priced at Rs 59,999. Competitive pricing and a newly-acquired army of 750 retailers and resellers in 213 locations, did the trick. Says Aditya Pant, 29, Head of Research, IDC India: ''HPI's performance last year was the result of its focus on both the commercial and consumer segments.''

Competition ahead

The graph is headed north in other product segments as well. Between November, 1998, and October, 1999, sales of NT servers rose by 55 per cent; those of printers grew around 35 per cent, and scanners' doubled. But keeping the figures soaring may get increasingly difficult. For, HPI's competitors are getting their act together too.

PC major Dell is setting up shop in India; IBM plans to replicate HPI's success in India with its own assembly unit in Pondicherry; Compaq, for a year now, has been operating its own unit in Bangalore; market leader HCL is packing more features into its boxes like launching Beanstalk, its higher-end model, with a 700-mhz Intel processor. And price warrior Zenith Computers has, in the past 12 months, launched stripped down models, offering various components as add-ons. That has helped it penetrate deeper into the market. Clearly, there's a rush to straddle as wide a price range as possible. Agrees Ravi Aggarwal, 48, Vice-President (Computer Products), HPI: ''If you are not assembling locally, you cannot achieve this kind of numbers.''

Similarly, HPI may have two-thirds of the printer market, but it operates in relatively low end. Besides, its smaller competitors are growing faster than it is. For instance, in inkjets, Epson more than doubled its sales last year to 60,258 units and Canon notched an 87 per cent growth. Notes a Mumbai-based competitor: ''Profits in hardware are falling. The company needs to add more value to its products.''

That apart, the India operations need to align themselves with the changes taking place in HP world wide. CEO Fiorina wants to grow hp along the three vectors of e-services, information appliances, and 'always-on' Net infrastructure. At the moment, though, the Indian subsidiary's revenue are hardware driven. Ayyar, however, says he has no doubts that Net infrastructure will be a key area of growth in the future.

It's not at all surprising, because nobody more than HP knows the price of being a hardware has-been.

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