TN channel up in arms over Elcot-Lenovo move, demand uniform pricing

Sethuraman NR

Chennai

September 24th, 2007

Last week saw the Tamil Nadu channel almost boycotting Lenovo laptop and
desktop sale from the market over what they perceived was an unfair move by the
vendor. The issue started last week when ELCOT (Electronics Corporation of Tamil
Nadu) announced plans to sell Lenovo laptops, which originally cost about Rs
44,000, for Rs 26,000 to 30,000. The laptops are powered by a 512MB RAM and have
80GB HDD, including a high-end T2300e Intel Core Duo processor. The desktops had
the same configuration consisting of PD820 processor. The Tamil Nadu government
had introduced this project in a bid to increase PC penetration in the state,
and for the student community. ELCOT was appointed to handle the sales.

In response to ELCOT's plan, resellers in Tamil Nadu whose businesses will
bear the brunt of this project, requested Lenovo to take suitable action or face
boycotting from the reseller community in South.

Channel up in arms

Throwing light on how the move by ELCOT adversely affected the resellers PN
Prasad, VP, Confed-ITA said, "Most resellers were not aware of the ELCOT
project so they were quoting the existing market price to the customers who
started accusing resellers of swindling their money, as the ELCOT promoted
laptops were available for a very low price. We had no idea about this price and
were shocked when we came to know the price being offered by ELCOT."

Adding further on the same M Magesh President, IT Traders Association (ITTA),
Pondicherry, said, "We sent a letter to Lenovo asking them to brief us
about the situation and urged them to sell desktops and laptops to us at the
same price offered to ELCOT. We asked them to take action within 24 hours else
we would have to discontinue selling Lenovo products. Since there was no
response from them we sent a circular to resellers in Tamil Nadu asking them to
discontinue selling Lenovo products till our requests were met."

With no response from Lenovo and the situation not getting any better, on
Sept 20 the association called a meeting to discuss further actions. Sharing his
thoughts after the meeting, Magesh claimed, "We are very clear about our
stand, and have asked Lenovo to immediately act on this issue. In turn they have
promised to take action and as a first step they have stopped the advertisement
carried on the ELCOT website," he said.

S Karthikeyan, President, Confed-ITA said, "We are looking forward to
better relationships with Lenovo and we don't want to take the issue beyond
borders, but at the same time we have to ensure the welfare of our channel too.
We have asked Lenovo to stop advertising the project and they have taken the
initial step. We have also urged them to sell the laptops and desktops to us for
the same price offered to ELCOT, and to incur the loss in case a customer
returns the laptop."

Lenovo's stance

Clearing the air about the issue, Anand Nambiar, VP-Strategic and Business
Relations, Lenovo said, "The project was offered to the government as a
policy of Lenovo, to enhance computer penetration among the student community. A
few points need to be clarified on the price issue. Lenovo did not offer 40 to
50 percent discount on its laptops. We were miserably let down by a few wrong
reports in newspapers, web portals and the ELCOT website. We did not offer high
configurations at such a low-cost. We offered only laptops with minimum
configuration PD820 and 2300E processors, which are at the end of their
life." He added that these were not the high configuration laptops or
desktops offered by the channel, and clarified that high configuration laptops
and desktops with brand new processors cannot be rolled out at such a low price.
"There has been some communication gap which has led to this and as an
initial step we have asked ELCOT to stop advertising the project, which was
posted on their website without our knowledge. They have cooperated with us by
removing the ads and have also stopped other plans like issuing pamphlets,"
he said.

Nambiar further stated that as an initial step Lenovo was going to sell only
100 laptops and based on the response, they planned to go further. "But
frankly, since the announcement, not a single order has been placed for these
laptops and desktops from ELCOT," he concluded.

About the meeting with Confed-ITA, Nambiar said, "We have spoken to the
association president and have briefed him about the confusion. We too would
like to work for the welfare of the channel as we are completely dependent on
them. We can't afford to lose them as they are our carriers." Nambiar also
said that immediate action has been taken to resume trade in the region.

Unresolved issues

Responding to Nambiar's comments, Karthikeyan said, "The configuration
offered by Lenovo to ELCOT is the best and we can't call it an 'end of life
processor' as per the Intel policy where they are rolling out high power
processors every month. So we are just asking Lenovo to sell the same
configuration to resellers also. The configuration is available in the market
for around Rs 46,000, which is 40 percent more compared to what ELCOT is
offering," he added.

On the policy to supply laptops for students, Karthikeyan said, "We are
not against the student community and education policies of the government.
Though we welcome the decision, we too want the Rs 31,000 configuration, which
is available for Rs 29,500 to ELCOT for students. Though the government is
making the provision only for students, there is a chance that others will
procure it from students. One should also accept that each and every home has a
student. Not only Lenovo, we are also insisting with other laptop vendors about
standardizing prices, as other brands too have not been selling for weeks.
People do not want to buy laptops from us since the government is giving it at
such a low price."

Karthikeyan refused to accept the stand that Lenovo planned to sell only 100
laptops, as ELCOT has already procured 10,000 laptops from both Lenovo and Dell.
He questioned, "Even if Lenovo has stopped advertisements, people are going
to buy Dell laptops, and that is going to be the death of channel community.
Until and unless we supply laptops and desktops at the same price offered by
ELCOT, our trade is not going to take off. We are returning our laptops to local
dealers and are going to refrain from selling any laptops for now, and also,
there are no orders for laptops," he said.

Karthikeyan added, "We are looking forward to working in harmony with
vendors. We want Lenovo to solve the problem soon and resume trade as quick as
possible by addressing key issues of the channel, because bilateral accord is
very important in trade."