Despite the reduction of its PC market share in China, Hewlett-Packard Co says it will not spin off its PC division as it said it would months ago. The United States-based company said it has the advantage of strong negotiating abilities with component suppliers. [Photo/China Daily]

US company wants to build up its software and server sector across China

BEIJING - Hewlett-Packard (HP) Co, the largest PC maker globally by sales, said the company will stick to its PC business this year in China.

It announced it will place a central focus on software, server solutions and the PC business in the country, the world's largest PC market in 2012.

The United States-based company's previous plan was to spin off its PC business in August 2011, but the plan was halted by new chief executive officer Meg Whitman in October.

The PC business will be the core of HP's business in 2012. The company's goal is to recover China's distribution channels and partnerships, create profitable growth and increase investment in human resources and government projects related to China's 12th Five-Year Plan (2011-2015), said Steve Gill, managing director of HP China.

He said that although 2011 was a very difficult year for the PC industry, the service business had a significant growth rate that increased 25 percent.

HP China has been in the Chinese market for 26 years. However, a quality scandal in March 2010 caused the company's PC market share to fall from a previous 13 percent to its current 8 percent, according to the US-based research company IDC.

Luciana Broggi, vice-president and general manager of HP's Asia-Pacific and Japan Personal Systems Group Channel Sales Organization division, said: "The reason for HP not to spin off our PC sector is that our PC business allows us to have a strong negotiating ability with component suppliers."

Broggi also mentioned that from the company's financial perspective, the PC sector brings faster cash returns with less investment compared with HP's other business. "It's good for our financial balance," she said.

The company said China will become HP's priority in 2012 and the company will develop China-exclusive products for the market and nurture new partners in rural areas because those markets are increasing in size rapidly. Lenovo Group Ltd is the biggest PC company in China and it aims to increase its market share from about 33 percent to 35 percent in 2012.

"Although Lenovo's market share in mature global markets is still relatively small, it has a very strong advantage in the Chinese market," said Kitty Fok, vice-president of International Data Corp Asia-Pacific.

"Lenovo is a very strong competitor in China and overseas markets. We will watch it carefully," Broggi said.

Apple Inc is also an aggressive rival in the PC market.

HP won't copy competitors. Instead, it will set up a new strategy including the launching of new products in China, Broggi added.

"The server and solutions business has performed more strongly in China than globally. However, it only amounts to a very small portion of HP's business in China," said Gill. He confirmed that the company will invest more in this sector in 2012.

HP said it will focus on servers and software in the Chinese market, including helping companies and the government transfer their traditional servers to a cloud-based server. It will get more involved in cloud computing design, planning and even cloud printing.

According to the company, it now has more than 10 million cloud printing users. The number is expected to hit 50 million globally in 2013.

"HP will develop its business partnerships from the private and public sectors in this country to increase the portion of its solutions business," Gill said.

Gome Electrical Appliances Holding Ltd, China's largest electronics retailer by sales, announced its new e-commerce enterprise resource planning system called Leader last year, which was developed with HP.

According to Gome President Wang Junzhou, the project was jointly developed by the company and HP over two years. Gome said the system's new functions will improve its online operations system, such as the sharing of inventory information nationwide, to improve supply efficiency.

"Our biggest server customers in many countries are in the public sector. However our Chinese business in this sector is not as strong as in other countries," Gill said. He said HP China will pay attention to the country's 12th Five-Year Plan (2011-2015) projects to seek any opportunities they throw up.