HP UNDER THE GUN TO FIX CHINA PROBLEMS
PC giant still reeling from faulty laptops, PR stumble in key market
SAN FRANCISCO — It became painfully evident earlier this week that Hewlett-Packard Co. is still having trouble with its PC business in China, and experts say the company still has work to do to repair its image.The high-technology giant reported weaker-than-anticipated revenue for its first fiscal quarter on January, and issued a disappointing forecast for the current period. Part of the shortfall was blamed on H-P’s ongoing struggle in the Chinese PC market. The news had an impact on the company’s market value, pushing the stock down more than 12% for the week as of late Friday afternoon. Read full coverage on H-P’s results.“It’s a big market,” Chief Executive Leo Apotheker told analysts on Tuesday’s earnings call. “It’s a very important market, and we are very much focused on getting it right.” While the issue was limited to a specific line of products, O’Donnell pointed out that H-P’s image among Chinese consumers took a big hit.
‘Literally within one quarter, H-P lost half of its market share’ in China.
Bob O’Donnell, IDC
“It’s one of those issues where they got associated with, ‘Oh, they have a problem with that. It’s bad.’” he said. He added that H-P has recovered somewhat from the controversy, but “that’s been a big challenge for them.”So big that the company lost its No. 2 spot in the Chinese PC market, based on unit shipments, in the third quarter of 2010. Lenovo No. 1, while arch-rival Dell Inc. moved into the No. 2 position, according to the most recent data from IDC . H-P’s market share tumbled from about 17% in the third quarter of 2009 to 9% in last year’s third quarter.
China PC shipments make up roughly 20% to 21% of worldwide shipments, according to IDC.Meanwhile, H-P’s rivals clearly benefited from the company’s China problems. Lenovo saw its market share jump to 29% from 26.5% in the third quarter of 2010, while Dell’s share rose to 10% from about 8%, IDC data say.
That’s because, about a year ago, H-P got it wrong.
The company’s failure to quickly address problems involving a line of faulty laptops in China triggered an uproar among consumers in the Asian nation. The glitch stemmed from defective graphics chips from Nvidia Corp. , which have since been fixed.But Chinese consumers accused H-P of not offering the same extended warranty that the company gave to U.S. customers. H-P eventually apologized and offered both extended warranties and compensation.
H-P is still the No. 1 personal-computer vendor worldwide, with its PC business making up more than a third of its total revenue in the last quarter. But the controversy last year was big blow to H-P in China. About 18% of the company’s total revenue in the most recent quarter came from the Asia-Pacific region, though H-P would not break down the Chinese revenues specifically.“Literally within one quarter, H-P lost half of its market share” in China, IDC analyst Bob O’Donnell said in an interview.
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