Dell looks out of China

PM sees $25b window of opportunity for India

Prime Minister Manmohan Singh dropped a bombshell at the meeting of the full planning commission on Tuesday when he disclosed that the US computer hardware giant Dell was looking at shifting out of China, and hinted that the company may be looking at India as its sourcing base. Dell, he quoted the company’s chairman as saying, buys $25 billion from China. China’s loss could mean a huge gain for India, he added.

The news comes on the heels of software giant Google shutting down its search engine in mainland China and redirecting Chinese language search traffic to Hong Kong.

The prime minister, in his closing remarks at the plan panel meet, said: “A very important point has been raised regarding development of the hardware sector of information technology. This morning I met the chairman of Dell Corporation. He informed me that they are buying equipment and parts worth $25 billion from China. They would like to shift to safer environment with climate conducive to enterprise with security of legal system. So I think this is an area where there are

immense opportunities. I urge the Planning Commission to apply their mind about development of hardware and parts of computer industry.”

The prime minister’s comments and the possibility of Dell shifting base out of China to India throws up immense possibilities for India’s information technology sector that has dominated global software business, but has been weak in hardware manufacturing.

India’s importance in Dell’s global game plan was buttressed by Dell Global CEO Michael Dell, earlier in the day, in his interaction with the media. He said, “India is a big market and it’s growing very fast. Our India business is growing at 100 per cent. We are growing faster than the market, which is growing less than 100 per cent. We see enormous opportunities of growth in India.”

Dell stopped short of revealing his India strategy vis-à-vis China.

The Times of India on Tuesday reported that Dell had made its first exports out of India from its PC manufacturing plant in Sriperumbudur in Tamil Nadu. However, Dell did not specify actual India revenues, saying the company did not offer country wise figures. He said customers here were looking for more value added services and the company was working on products, which were scaleable in the future.

He also said with the recession blues getting over and markets picking up, the company sees demand for computers and servers picking up.

Reacting to the prime minister’s observation, Sunil Dutt, president (personal systems group) at Dell’s rival HP, said: “HP was one of the first organisations to set up a manufacturing facility in India and I think so long as the manufacturing climate remains conducive and with support from the government, several other companies from the sector would come and set up facilities. This way, IT can also play a leading role in India like other industries such as automobiles.”

Vinnie Mehta, executive director of the hardware manufacturers’ association, MAIT, said, “We are delighted that the prime minister has appreciated the potential of hardware industry. Government machineries should be mobilised to

deliver such recommendations.”

Dell Computer makes laptops, desktops and servers. It is the second biggest player in India after HP, in terms of number of units sold, and is in the process of expanding its operations in the country in a bid to grab more customers in the large and small enterprises segment.

Dutt of HP said, “From the competition point of view, in any case, it is always there and is good for the companies. I think there is a space to play a key role for everyone and the kind of market in India, it is still long way to go.”

Dell's total global revenue in the quarter ended January 29 was $14.9 billion, an 11 per cent increase from a year ago and a 16 per cent sequential gain. Revenue improved in all of Dell's business segments as the company consolidated results from the former Perot Systems for the first time.

Asserting that the company has 13 per cent market share in India, general manager, Dell India, Sameer Garde said Dell’s presence has grown rapidly over the last two years to take the number 2 position in the Indian PC market in the fourth quarter, from 11.3 per cent in the third quarter of 2009.

He also claimed that the company has become the number one player in the Indian notebook market, with a market share of 26.3 per cent, up from 22.2 per cent in Q3 2009.

Dell sees India as a vital part of it global strategy, identifying it as among the key emerging markets along with the other Brazil, Russia, India, China (Bric) countries. The major verticals contributing to this growth were the SMB and consumer businesses.

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