HP Plans to Restructure Its China Business

American IT giant Hewlett-Packard (HP) may transform its business structure in China.

The withering PC business in China may force HP to restructure its business structure in this country. Recently, HP CEO Leo Apotheker and a group of senior executives paid a visit to China and stated that HP would increase its investment into the Chinese market. However, the investment will not focus on PC market.

“The development strategy of HP in China matches our rhythm in mobile Internet and cloud computing,” said Leo Apotheker.

During his visit in China, Apotheker declared four investment plans, covering cloud computing, system development, technology infrastructure and social media platform. He didn’t even mention about PC business. Only social media platform has is somewhat related with the underperforming PC business.

Last year, the Chinese commodity quality supervision department received many complaints from HP’s PC users. In the “March 15 Evening” of Central Television of China, HP was criticized by representatives of consumers and experts. After that, HP’s PC business was trapped in “Poor Quality Event”. The American company took a lot of measure, attempting in vain to negate the bad influence.

The quality problem greatly hit HP’s PC business in China, which is one of its pillar businesses for its global operation (the other two are Internet technology services and printers). According to the data from the world-known market survey institution Cartner, HP is the only one of the Top 5 PC makers (HP, Dell, Acer, Lenovo and Toshiba) having drop in sales and revenue in the PC market of China in the first quarter of 2011. In addition, its market share in China has dropped from second place in 2010 to the fourth place in 2011. Ye Lei, chief analyst of Hardware System Group of Cartner Asian-Pacific Areas, says, “The quality problem last year is the main reason to the recession.”

Though HP hoped to have faster response to the Chinese market, it had to admit its understanding of Chinese Internet market was outdated in the past two years. For example, corporate blog already became a necessary tool for companies’ propaganda in China two years ago, but HP just opened its official blog in July. 

Though the official blog is late, HP still considers it as an important tool for communicating with Chinese consumers. The first article published on its blog told an appointment. Steve Gill took the place of Gao Ruibing as the president of HP China. Gill is the eighth president of HP China and the only one who cannot speak Chinese. His predecessor Gao Ruibing, Taiwanese, only stayed in this position for seven months.

In addition, Todd Bradley, executive vice president of HP and president of HP’s Information Products Group, is given the job of supervising Chinese business.

The two appointments show that HP’s headquarters is not satisfied with it PC business in China. Previously, HP’s PC had fast development in China under the leadership of HP China’s vice president Zhang Yongli, who built vast distribution channels and found many partners in HP. In 2009, HP became the second largest PC company in China, but HP’s headquarters thinks that the position does not match its position as the largest PC company in the world. In 2011, HP lost its second place and dropped to the fourth place in China, with Lenovo, Dell and Acer ahead of it.

HP hoped that the new executives of China’s PC business could bring new energy into this field. But experts point out things may not go as expected by HP. First of all, the language is a tough problem for Steve Gill. In addition, Steve Gill has to handle his relationship with Fu Biaobang, president of HP Asian-Pacific Areas and senior vice president of sales. Fu Biaobang once worked as president of Dell Greater China and is very familiar with China’s PC market.

Fu Biaobang says that the communication between HP’s workers is not a problem. In addition, the appointment of Bradley shows that HP attaches great importance to the Chinese market. “I think I can work well with Steve Gill and Zhang Yongli,” says Fu Biaobang.