Dell Says Low Business Confidence Hurting Consumer Spending in India
06/20/2012| 11:58am US/Eastern
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--Dell won't pass on higher input costs from weaker rupee to consumers
--Will continue to invest in emerging markets, despite the macroeconomic challenges
(Adds comments of executive in 11th and 12th paragraphs, detail)
By Kenan Machado
MUMBAI--Dell Inc. (>> Dell Inc.) said Wednesday consumers in India are wary of spending on technology as economic growth slows and the business environment remains uncertain in the South Asian nation.
"It's just about the confidence" in the economy, Amit Midha, Dell's president for Asia Pacific and Japan, told Dow Jones Newswires. "There is a lot of money sitting on the sidelines which people are not putting to use."
Mr. Midha's comments echo the concerns raised by other computer makers, like the local unit of Taiwan's Acer Inc. and China's Lenovo Group Ltd., which have warned of a potential slowdown in demand for personal computers amid weak economic growth in India.
The Indian economy grew 5.3% from a year earlier in the January-March quarter, its worst pace in almost a decade.
The slowdown in the South Asian nation deals a setback to most global PC makers who have been betting on the demand in emerging markets like India and Brazil, especially from first-time buyers, to tide over the weakness in developed markets.
Earlier this month, the Round Rock, Texas, computer giant forecast strong growth in its PC business over the next four years, most of which is likely to be aided by the sales in emerging markets such as China, India and Brazil.
Dell, which lost its market leadership in India in the just-ended March quarter, is the second-largest PC maker in the country in terms of unit shipments, according to research firm Gartner Inc.
The company, like other global PC makers is hit by the sharp fall in the value of the Indian rupee against the U.S. dollar, which has increased the cost of importing PCs and parts and put pressure on computer makers to raise prices.
The rupee is down more than 20% against the U.S. dollar over the past 12 months, making it the worst-performing Asian currency.
Most PC makers have raised prices to offset the cost pressures from a weaker rupee. Dell has so far raised the prices of PCs by 6% to account for the weaker rupee.
But Mr. Midha said the company won't pass on the full impact of a weaker rupee to its customers, as it is looking to streamline its processes to save on costs.
Mr. Midha, who is also the chairman of Dell's emerging markets business, said the company will continue to invest in this region, despite the macroeconomic challenges. He expects the business in emerging markets to rebound once the economies in the region recover from the economic turmoil.
-Write to Kenan Machado at kenan.machado@dowjones.com
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