Toshiba likely to snap ties with HCL Infosystems

Written by Varun Jaitly | Vrishti Beniwal | New Delhi, Aug 1 | Updated: Aug 2 2007, 05:41am hrs
Toshiba may be planning to pull out of its exclusive distribution deal with HCL Infosystems over the next few months. Sources say that Toshiba now wants to go in for direct distribution and has already started recruiting people for its sales division. The company is also believed to be in the process of identifying locations for the stores in Delhi. However,spokespersons of both HCL and Toshiba, when contacted, denied any such move calling it a speculation.

If Toshibas move does go through, it will be a blow to HCL, since a sizeable chunk of its revenues come from the distribution business. HCL is handling sales and support for Toshiba with 20 centres in India.

Earlier, Nokia, another major partner of HCL, had also decided to venture into direct distribution and sales for the first time since it entry in India a decade ago.

The HCLToshiba partnership was cemented in 1980 when HCL set up a copier-manufacturing factory in Dehradun in technical collaboration with Toshiba. After liberalisation of import norms in 1994, HCL became the exclusive distributor for sales and services of Toshiba copiers.

Market analysts said that Toshibas move made business sense as the sector was growing and both the companies are market rivals in terms of product portfolio (notebook business).

Moreover, analysts point out that companies prefer to be independent in forming their own distribution chains in a growing Indian retail market.

About 80% of HCLs revenues come from telecommunication and office automation, while the remaining comes from computer systems and other related products. Last year, HCLs revenues from computer systems and related products stood at Rs 2,294.70 crore, while net sales from telecommunication and office automation were at Rs 9,049.81 crore.

Currently, HCL is a joint partner of Toshiba in India in a number of fields and products in the IT and office automation domain, including notebooks, multimedia projectors, and software development.