 "Amar Babu")
The personal computer industry globally is going through a turbulent phase owing to waning consumer demand as they are looking for devices of different form factors. Lenovo which is the number two player in the Indian PC market is now focusing on its smartphone and tablet business in India.
In an interview with Bibhu Ranjan Mishra, Lenovo India’s Managing Director Amar Babu talks about why the company is going slow in the government segment and how it is positing itself as a smart connected devices player. Edited excerpts …
How has been Lenovo’s experience during the first half of the calendar 2013, in the Indian market?
Last quarter was a fantastic one for us. We have gained very good share across all segments. We ramped up our tablet business quite well; as per IDC we sold around 1,30,000 units last quarter.
While PC growth has definitely been subdued, we have been able to grow faster than the market. The enterprise business has been a little slow while the govt. buying is also not happening in big way outside the large deals. But we are seeing tremendous growth in smartphones and tablets.
You held the number one position in the Indian PC market almost for an year last year, but now you have slipped to number-two position. Is it a cause of concern?
We are number two player now, and it’s a conscious choice. We always have the aspiration to be the leader, but we need to get to it through the right way and with the right mix of businesses. While pursuing that ambition, we also need to invest in the smartphone and tablet businesses. We would like to be a much bigger player in the smart connected devices segment.
Have you taken a conscious decision not to pitch for large govt. orders which are margin dilutive?
That particular segment of the market requires a certain specifications of products and cost structures. At some point of times, it needs to make larger business sense. Costs are high in this segment because the pricing is very low which puts tremendous amount of pressure on your business.
So while, of course, we will participate, I don’t think we will go to the extent of saying that we will win it at any cost to get to a leadership position. Because, we believe that any business that we do should be sustainable.
You are one of the few companies who had supplied to the Tamil Nadu govt. for the free laptop programme. Was it a bitter experience?
I won’t say it was a bitter experience. The problem that happened at that point of time was a larger industry issue. When we started discussion for the TN govt. contract Rupee was trading around 47 to USD which kept on depreciating to touch around 56-57 when we finished the delivery. There is no ERV (exchange rate variation) clause in govt. tenders. I think that is a big risk and it limits the ability of the players like us to really participate in govt. tenders since the roll-out timeframes are very long.
The govt. has recently issued a circular saying ERV clause should be applied in IT hardware procurement contracts. Is it not helpful?
The Ministry of Finance has issued a circular saying that ERV clause should be considered, but only for contracts the roll-out of which take more than one year. This would have made sense in a normal scenario, may be three years ago. But today in one month, there has been volatility of 10%. So we have been impressing upon the government that it is a clause that has very limited impact and it does not solve the real problem because govt. contracts usually get executed between 3-6 months.
Lenovo is quite known for its 'protect and attack’ business strategy? Which are the businesses which you are protecting and which ones are under attack mode?
In the worldwide level, we want to protect our PC business; we are number one in the PC segment where we have 17.7% market share. There is definitely a huge opportunity to grow that business but we want to ensure a right balance between growth and profitability, and then use that strength in our ‘attack business’ which is the smartphones and the tablets.
We need to continue to invest in areas whether it is product innovation or new markets in building a brand that is regarded as a smart connected devices player. In the Indian context, we will balance growth and profitability while investing and driving our smartphone and tablet business.
You are also the president of industry body, MAIT. What are your views on the preferential market access (PMA) policy proposed by the govt.?
We understand that the direction in which the government is doing this, and I think any country would do that to drive local manufacturing. However, I think the norm should keep in mind the state of the supply ecosystem; because of you don’t have an establish component manufacturing ecosystem in the country, you necessarily have to import. We always support local manufacturing; we believe that being closer to the market has tremendous sets of business advantages.
The government has now extended the deadline for electronics products selling in India to the Bureau of Indian Standards (BIS) deadline. Is the industry relieved now?
We need to make sure that we are still able to meet the deadline. It is because the products have to be tested and certified, and there is a certain capacity at the testing labs and BIS. The industry is working very closely with the BIS and the government so that we are able to use this extension to get the certifications.
We are also working with the BIS and the MAIT to try and simplify the norms and explore if 'self-certification’ can be made as a cornerstone philosophy so that the ability of the government to certify more products becomes faster. We don’t want is a big delay in introducing new technology simply because the certification process takes longer.
