Updated: Mon, Jan 22 2013.
Chennai: The Indian unit of Chinese personal computer (PC) maker Lenovo Group Ltd has emerged as the lowest bidder for providing laptops to the Tamil Nadu government, which aims to give away 906,000 of the machines to students of state-aided colleges and high schools this fiscal year to fulfil a pre-election pledge by chief minister J. Jayalalithaa.
Lenovo India Pvt. Ltd quoted a price of Rs13,939 per laptop, around Rs10,000 lower than the retail price, as it seeks to increase market share in a country where it ranks number four among PC makers.
The second-lowest bid of Rs14,452 was put in by HCL Infosystems Ltd, said an official at the Electronics Corporation of Tamil Nadu Ltd (Elcot), the state agency charged with managing the procurement of laptops. Given the size of the order, it will be distributed among several bidders, said the official, who didn’t want to be named.
Lenovo India managing director R.K. Amar Babu, while not denying the company had emerged as the lowest bidder, declined to discuss price and quantity.
“We are still some time away from the actual order,” he said. “Discussions are on with vendors about price and quantity.”
The laptops are among the freebies, including kitchen mixers, wet grinders and livestock, that Jayalalithaa promised to dole out if she was voted to power in the state elections held in April.
After she swept to victory, she began making good on her poll promises, taking out tenders to procure vast numbers of the giveaways, which have had firms vying to be the lowest bidders and win the large-volume orders.
The Tamil Nadu government plans to distribute 6.8 million free laptops to students of government-aided high schools and colleges through the five-year term of this administration, at a cost of Rs10,200 crore. Of those, 906,000 laptops are being given away in the remainder of this fiscal year at a cost of Rs912 crore.
Lenovo, the maker of ThinkPad laptops, is the world’s second largest PC vendor, behind only Hewlett-Packard Co. (HP), with a global market share of 13.5%, after overtaking Dell Inc., and has voiced its ambition to become No. 1.
In the June quarter, according to market research firm IDC, Lenovo ranked behind Dell, Acer Inc. and HP in India. Lenovo sells about 275,000 PCs a quarter in India.
“We sold 12.5 million units worldwide the last quarter,” Amar Babu said. “In India, where we have doubled our market share to 10.8% in the last two years, we are also looking to be the leader. It is our long-term dream and aspiration.”
Lenovo has a significant penetration in both enterprise and consumer segments, but the education and government sector is comparatively underpenetrated. The Tamil Nadu order will significantly boost its numbers both in this segment and overall.
“We are doing well across segments, and we have good momentum,” Babu said.
Whatever the size of the laptop order for each company, it would help boost sales and visibility, though it could mean a cut in margins, an analyst said.
“In the long-term, it will be profitable, but it will not have a major impact on the company’s bottomline (profit) immediately,” said Vishal Tripathi, principal analyst at market research firm Gartner, speaking about Lenovo. “Of course, visibility will go up tremendously and the company will also benefit from after-sales services.”
Since the Tamil Nadu government had planned to begin distributing the promised freebies on 15 September to mark the birth anniversary of late former chief minister C.N. Annadurai, a first small-volume tender was taken out at the time, and HP and Acer won that bid to supply 6,600 laptops at a price of Rs14,040 per unit. The remaining 906,000 machines must be delivered by the winning bidders in the next five months.
Readymade configurations featuring the Intel Pentium dual-core processor are available in the market at about Rs23,000, according to two Chennai retailers.
An Elcot expert panel, which specified the configuration, had expected bids to come in at Rs14,000-15,000, the Elcot official cited earlier said.
Lenovo’s price quote is quite viable, considering its production capacity in China and the volumes at play, said Sumanta Mukherjee, lead analyst (computing products, IT peripherals and channels) at CyberMedia Research. Some of the specifications are obsolete, but it could help Lenovo clear entry-level stock, he said.
Lenovo’s bid came as a “huge surprise” to Indian manufacturers, according to another bidder, Kaustuv Ray, chairman of RP Infosystems Pvt. Ltd, which manufactures computers and laptops under the Chirag brand. Ray’s company quoted a price of Rs14,500 per laptop, he said.
“We have already told the Tamil Nadu government that we are willing to match Lenovo’s bid, if the company wishes to share the contract with other manufacturers,” Ray added.