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H-P Split Leads To New E-C Focused Indian Firm

With $47 billion Hewlett Packard's decision to split its global operations into two companies, a new company will be formed in India to target the country's growing e-commerce industry.

The software business, which is being conducted under HP India Software Operation, would continue to exist as a part of HP India.

Currently, HP India has a presence under two independent business identities - Hewlett Packard India and HP India Software Operations - with gross revenues of Rs 656 crore (US$ 154.55 million).

"The entire restructuring exercise would take about 12-18 months to complete. The proposed new company would make its initial public offer of 15 per cent stake by the end of this calendar year," said Ganesh Ayyar, HP India's president.

He added that the motive behind the restructuring was to align the company with the changing market scenario and increase customer focus.

The newly formed computer and imaging company will focus mainly on the fast-growing markets, including Internet-related hardware that could command a premium and other related e-commerce technologies.

HP -- with a stock market value of more than $70 billion -- has for long been the leader in Unix-based servers, PCs and also low-end Intel-based servers.

However, in recent years, with increased competition, H-P has been losing market share to Sun Microsystems and IBM Corp. in the server business, and profits from computers sales have also been dipping due to declining prices.

For the firm, India has been the fastest growing market. In its nine years of existence, the company has grown from a Rs 10-crore (US$ 2.36 million) turnover to Rs 656 crore (US$ 154.55 million).

At the same time, it has transitioned through relationships beginning with a joint venture with Blue Star and HCL, to a wholly-owned subsidiary today. Ayyar pointed out that India held tremendous potential.

"India is a part of our international procurement network. Its present exports, though a minuscule $7 million, will grow exponentially," he said.

He added that the opening up of ISP market had provided the industry with tremendous growth opportunity. And the first area where it would impact upon is the home PC segment.

With a strong literate class, fully aware of the importance of the internet, the IT industry will get into Indian homes, he maintained.

Verifone, one of the leaders in electronic payment system, has functioned as a separate unit.

Now, globally it is to be integrated with the parent company, a task that will be complete by May this year.

Market leaders felt that it would help H-P accelerate their plans on e-commerce.

With Indian ISP policy in place and Internet being highly accessible, there will be an automatic shift to e-world. Business units will realize the ease and advantage of using e-commerce, Ayyar said.

Ayyar said India has become a major global manufacturing center for a variety of products and e-commerce would be particularly useful to OEM suppliers.

In fact, he added, Extended ERP will be the next wave hitting the corporates. It will help companies establish a supply management system integrating them with such suppliers.



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