Wipro Says Goodbye to PC Manufacturing Business

by CXOtoday News Desk    Dec 05, 2013

wipro

India’s third largest software services player, Wipro has announced its exit from PC manufacturing business, one of the very first IT businesses the company forayed into before it entered IT services. The company however has said that it will continue to strengthen its position as a system integrator and increase its focus on IT solutions and services.

No gain in PC business

Wipro, which forayed into the hardware business in 1982, with manufacturing units in Kotdwar (Uttarakhand) and Puducherry, having a combined capacity of about 2.20 lakh units of desktops, laptops and servers.

Keeping pace with the global trend, the PC India market is also witnessing a sluggish growth and a quarter-on-quarter decline in revenue. According to a new report by the research firm IDC, the overall Indian PC shipments in Q3 2013 stood at 3.24 million units, a slide of about -8.3% over Q2 2013. A heavy decline is expected continue in the subsequent quarters as well.

Wipro has withdrawn from PC manufacturing it due to falling profitability and a market share of only 2.5% in the overall PC market. The company’s hardware division earned 4% revenue compared to 20% for the IT services business in the last quarter.

Raghavendra Prakash, GM and business head in Wipro’s systems and technology division explained in a statement that Wipro will discontinue manufacturing SuperGenius line of desktops, EGO laptops and NetPower servers in a market where customer needs are changing rapidly. “PC manufacturing turned out to be a commoditized business losing differentiation. It was not a critical link in the IT strategy any more. We were a profitable product. But there was no differentiation between one PC to the other except for the branding,” he said in a statement.

Last month, HCL Infosystems made a similar announcement that will phase-off its manufacturing business in the coming months to improve margins and increase efficiency. Experts believe Indian PC makers have been marginalized by global players like HP, Lenovo, Dell, and Acer. At the same time smartphones and tablets have made a powerful presence in the market, causing a faster deterioration of PCs. Keeping pace with the tablet revolution, Wipro launched Wipro E.GO Sense in 2010, but it did not take off as expected and was shut down.

More focus on IT services et al

The company is banking heavily on IT services. “Our vision is to strengthen our position as a leading system integrator,” said Soumitro Ghosh, senior VP and head of Wipro Infotech. It would fulfill its warranty and AMC (annual maintenance contract) obligations and offer support services to the entire installed base as part of its regular managed service offering.

Wipro has recently signed an agreement to buy Opus Capital Markets Consultants for $75 million to boost its mortgage business. The acquisition will strengthen Wipro’s mortgage solutions and outsourcing business, apart from complementing its offerings in mortgage origination, servicing and secondary market

The company is also betting big on Indian e-commerce business and may buy Myntra stake for $50 million, according to a report. According to reports, the company’s promoter Azim Premji’s PremjiInvest, is in discussions to lead a $50-million fund-raise in fashion e-tailer Myntra, thereby making a foray into the million dollar e-commerce opportunity in India.

[Read on: Wipro to bet big on mortgage, e-commerce]

According to a source, the number of employees in the PC manufacturing business of the company is less than 2,000 and Wipro will re-deploy all the affected employees in the company. Prakash also added that the company will continue to have a presence in the hardware business offering solutions only for large integrated deals.