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BANGALORE: Standard & Poor’s Ratings Services said today that there is no immediate impact on its ratings on India’s Infosys Technologies Ltd and Tata Consultancy Services Ltd following the recent financial market turmoil.
However, the current environment increases the challenges in raising the rating, given that financial services represent the largest industry segment for both information technology (IT) services providers; their operating margins may weaken as a result.
Nevertheless, both companies continue to register strong growth in non-financial sectors such as manufacturing, utilities, and healthcare. The current financial market turmoil could also eventually result in increased outsourcing to reduce cost and manage integration, thereby benefiting India’s leading IT services providers.
The ratings on Infosys and TCS continue to be supported by their conservative financial profiles, consistent profitable track record, and debt-free or minimal debt position. Standard & Poor’s will review the ratings after fiscal 2009 results are announced, with any potential adverse rating action likely to be limited to the outlook being revised to stable from positive.
Source:Times of India
September 26th, 2008
SANTA CLARA: Microsoft Corp chief executive Steve Ballmer said that he still sees “certain buoyancy” among technology and telecommunications customers worldwide, despite recent US economic woes.
“Our industry is not immune to what goes on in the global economy. And yet as I travel…given the current circumstances, people still see a certain buoyancy in the market,” Ballmer told a meeting of Silicon Valley civic leaders.
“At least, for now, people are feeling, I won’t say optimistic, but better than you would be feeling if you are watching CNBC all day,” he said of the financial TV channel.
Ballmer, the leader of the world’s largest software maker, said he was speaking generally of industry demand rather than his own business. “We are one week from the end of the quarter, so I have nothing all that interesting to say,” he joked.
Wall Street analysts, on average, expect the Redmond, Washington-based company to generate an 8 per cent rise in revenue to just under $15 billion during its fiscal first quarter ending in September.
Source:Times of India
September 26th, 2008
MUMBAI: A top-ranked US analyst has said the events that shook Wall Street last week spell the end of the golden age of offshoring for India.
Days after Wall Steet’s collapse, vice-president and principal analyst with US research firm Forrester, John McCarthy, said the scale of the crisis had rendered all previous studies including Forrester’s own survey, released earlier this month, redundant, and that Indian IT providers should prepare for slower growth and lower profits.
“It is naive to say an economic slowdown is good because cost-cutting will lead to higher offshoring. This is no longer a recession, it is fundamental a re-structuring of financial services that is taking place,” he told ET from Boston, Massachusetts. Many analysts, including research firm, Gartner, had said there could be higher opportunities for Indian companies and for offshoring.
However, McCarthy said there was already an impression that the financial services sector was over-staffed. Mergers and acquisitions and the conversion of large investment banks into commercial banks meant there would be fewer employees, fewer vendors and less extravagant IT budgets.
These developments, McCarthy said, would have a huge impact. Growth from financial services, the most aggressive buyers of technology, he predicted, would ‘go back to 25 per cent and stay that way’. To put this in perspective, IT bellweather Infosys Technologies had shown a 50 per cent growth in revenues from financial services clients in FY07.
What makes Indian IT vendors more vulnerable is their significant exposure to financial services clients –almost double that of their global peers as a percentage of revenue, according to McCarthy.
“There is no denying it will particularly impact Indian companies. In a way, they are paying the price for having under-invested in marketing all these years. Margins will continue to drift down to 15 per cent and there will be real pressure on the topline,” he said.
Also, the big difference between the last slowdown and the current one is that offshore presence of global vendors like IBM and Accenture has swelled from around 2,000-3,000 employees to 60,000-70,000.
The profit margins of Indian service providers, according to McCarthy, will move closer to that of their global peers, and barring one of two quarters of exceptional growth, Indian IT providers were unlikely to return to their historical growth rates.
Forrester’s own study, released just before the crisis came to a head, and based on an extensive survey across North America and Europe, had found 40 per cent of large businesses had slashed IT budgets, but a subset, 90 per cent of enterprises in media, entertainment and leisure, were not cutting back on IT spends.
While this holds some cheer for IT vendors, McCarthy said these sectors could not match the spends of financial services.
Source:Times of India
September 26th, 2008
BOSTON: Technology companies will be pulling out the stops to sign deals before the September quarter closes next week as customers spooked by the US financial meltdown shy away from spending.
“It doesn’t take much to keep people from signing a piece of paperwork because they are worried, and I would say concerns are incredibly high right now,” said Rob Enderle, principal analyst with Enderle Group, which advises companies on purchasing technology products.
Some sales could get pushed past September 30, while vendors will be pressured to drop prices, a double whammy for tech suppliers.
AMR Research analyst Kevin O’Marah said that as many as one out of 10 technology deals expected to close this quarter could be postponed or killed due to concerns that the financial crisis will exacerbate existing weakness in the economy.
“You’ll definitely see some drop off,” O’Marah said. “Somebody who is thinking about a project that is maybe a borderline decision, this could be enough to cause them to say ‘hold the presses. Let’s just hold that.’”
US investment banks have been selling themselves and seeking new investors, in the wake of mortgage crisis, causing fears to reverberate throughout the US economy that business will slow and credit will dry up.
Technology companies have long had to scramble to close deals in the final days of each quarter, but it is always toughest when the economy is weak. That is because buyers time their purchases on the theory that hardware manufacturers such as EMC Corp, IBM and Hewlett-Packard Co and software makers including Symantec Corp, VMware Inc, McAfee Inc and Citrix Systems Inc price their products like autos.
Car dealers offer the steepest discounts at the end of the quarter so they can meet sales targets. Tech companies generally deny that they discount more heavily at the end of the quarter, but that hasn’t discouraged customers from waiting until the closing days of the quarter to sign deals.
Source:TOI
September 24th, 2008
BANGALORE: The global financial meltdown following the collapse of US investment banks will have limited impact on the Indian IT sector in the short and medium terms, but poses a challenge in the long-term, says Som Mittal, president of IT-BPO industry body Nasscom (National Association of Software and Service Companies).
“It is a cause for concern, not panic. The Indian IT sector is resilient to bear the impact of the turmoil. We need to wait and watch to find out how deep is the crisis. There will be some downside in the short and medium terms, which will be two-to-four quarters,” Mittal said in an interview.
In the long term, the export-driven software sector has to become risk-protected from such uncertainties by penetrating other geographies and expanding its service offerings to diverse verticals so as to retain its competitive edge and sustain the growth momentum.
Discounting apprehensions over meeting the revenue forecast for the current fiscal (2008-09), Mittal said though the growth rate would be lower than in the previous fiscal, there was no cause for alarm, as the base would be wider and in line with the long-term projection made by the McKinsey report in 2005.
“Growth will happen but at 22-23 per cent it will be lower than in the last two-three years when the booming IT industry posted a CGPA (cumulative growth per annum) of 31 per cent. When the base changes (widens), it will be difficult to grow at the same rate over a period,” Mittal pointed out.
As per the Nasscom forecast in June-July, software exports are projected to grow by $9 billion to $50 billion in fiscal 2008-09 from $41 billion in fiscal 2007-08 and $32 billion in fiscal 2006-07. As per the McKinsey report, exports are set to touch $60 billion by fiscal 2009-10 even if the growth rate remains lower at 23-25 per cent.
“We will re-visit our annual forecast in December though we do a dip-stick all the time. As we are part of the global world, we are bound to be affected by such events. Being an integral part of the delivery chain, we are vulnerable to things that happen the world over,” Mittal admitted.
Though the US market accounts for about 60 per cent of the export revenue of Indian IT bellwethers such as TCS, Infosys, Wipro and Satyam, with the BFSI (banking, financial services and insurance) segment contributing more, other verticals such as manufacturing, retail, transport, utility and so on continue to keep traction.
“I believe we will get some indication over the next four-five weeks about the impact of the Wall Street turmoil on servicing the financial sector, especially in the US. In IT budgets, non-discretionary spend, which is about 70 per cent, will continue to happen. In a downturn, discretionary spend on new projects, innovation or upgradation gets affected. The impact, if any, will be on the latter,” Mittal explained.
In the IT-enabled services (ITES) such as business process outsourcing (BPO) comprising voice and data, captives may get affected while third-party vendors have to be prudent to minimise the impact in case of business disruption, especially in transactional or analytic outsourcing.
Source:TOI
September 24th, 2008
NEW DELHI: India’s fourth largest IT services provider, Satyam Computer Services, has opened another development center in Pune. This is Satyam’s fourth center in the city.
The 4.75 lakh sq ft facility situated in special economic zone (SEZ) at Hinjawadi is expected to accommodate 4,750 associates, according to the company. Employees at the new center would provide application development services and enterprise business solutions to automotive companies and financial service institutions.
Satyam which has 30 development centers in India and 19 across the world has invested approximately Rs 100 crore in the new facility.
Indicating that Pune is India’s next IT hub, Virender Aggarwal head of Satyam’s APAC and MEIA regions said, “Our investment in this development center is further indication that the country is emerging as an innovation leader.”
The centre, which Satyam has taken on lease from DLF, offers a host of recreational facilities like meditation room, multi-vendor cafeteria and gymnasium.
On inaugurating the centre, MD and CEO, SBI Life, Uday Sankar Roy said, “As one of its customers, I am glad Satyam has invested in Pune.” He added, “India is a recognised global leader in IT services and it needs state-of-the-art infrastructure such as this facility to convey that image to the world.”
source: TOI
September 24th, 2008
MUMBAI: Software firms that were banking on a revival in the second half of the fiscal can take some cheer from the words of Gartner’s top man in India.
Partha Iyengar, who heads the India arm of the global research organisation, says the collapse of Lehman and other financial giants will not significantly worsen the slowdown for software firms and a revival could be in the offing before the fiscal end.
“Software firms are already in a slowdown. I don’t see that trajectory changing because of the events of last week. The December quarter will follow the quarter we are in currently. We will start seeing an uptake after the US elections. The sentiment will start to shift after that and software companies may recoup some of the losses they made in the earlier quarter in the fourth quarter,” Iyengar, vice-president, Gartner India, told ET.
Contrary to the gloom inspired by the fresh bout of bad news, his outlook for FY09 remains ‘cautiously optimistic’ and that for FY10 ‘fairly optimistic’ with growth returning to earlier levels. Iyengar said there were big differences across the key IT markets.
There was a higher level of uncertainty and close to a sense of panic among IT buyers in the US and UK (because of its proximity to US). But companies in Asia-Pacific, while being cautious, were going ahead with their IT projects. The sentiment among European buyers fell somewhere between Asia Pacific and US buyers, he said.
Since the events of last week, the BSE-IT index has lost 167 points over worries dogging some of the largest customers of Indian IT companies. Merrill is one of the top financial services clients for number one software exporter Tata Consultancy Services, while Wipro and HCL Tech have exposure to Lehman.
On Monday, outsourcing firm eClerx Services Ltd, which went public less than year ago, said it had outstanding receivables of $1 million from Lehman. The collapsed investment bank was one of its top five clients, accounting for about 13 per cent of revenues.
However, Iyengar said some of the consolidation among large financial services players such as Bank of America’s acquisition of Merrill Lynch and Lloyd TSB’s takeover of HBOS would provide huge integration opportunities for IT firms.
“It’s true, there will be some redundancies and IT vendor consolidation but they will take time to play out. The bigger issue will be the integration opportunity it creates in the near-term, integration is the biggest single issue for banks,” he said.
The most significant difference between the last slowdown in 2001-02 and the current one was the ‘incredible amount of credibility’ Indian firms have built. Gartner is also advising IT firms not go back on job offers they have already made and not cut too deep to the bone when they rationalise recruitment.
“Resources (people) tend to have fairly long memories, and when the company gets back to hire-mode, you don’t want it to have negative impact,” he added.
Source:TOI
September 23rd, 2008
CHENNAI: Bankrupt financial giant Lehman Brothers Holdings, which is selling off its North American businesses and operating assets to Barclays Capital, owes around $5.5 million to as many as eight Indian companies such as Wipro, TCS, eClerx and Polaris.
This information came out after the troubled investment bank filed documents with the United States Bankruptcy Court (Southern District of New York) recently.
Lehman Brothers and the entities controlled by them owe around $2.3 million to Wipro, $1.39 million to TCS, $0.56 million to data analytics provider eClerx Services, according to available data. Other companies include Polaris ($0.51 million), L&T Infotech ($0.3 million), Satyam ($0.25 million), HCL Tech and Cognizant.
It also owes money to Tata Communications’ US subsidiary VSNL America. The exact quantum of amount with respect to the Tata company could not be ascertained, but sources indicate that Barclays may not assume the amounts owed by Lehman entities to VSNL America.
A Wipro spokesperson declined to comment citing upcoming quarterly results while a mail sent to TCS was unanswered. eClerx in a statement to Bombay Stock Exchange on Monday said that outstanding receivables from Lehman amounted to nearly $1 mn and that it earned 13 per cent of accrued FY09 revenues from this client.
With Judge James Peck approving the sale of Lehman’s North American operations to Barclays recently, it is likely that the latter will pay the outstanding amounts to most of the Indian companies. But new appeals already filed by some hedge funds and other creditors may complicate and stretch the pay-back time, until the deal is executed, it is learnt.
Source:TOI
September 23rd, 2008
PUNE: The University of Pune (UoP) and semiconductor giant Intel India on Monday announced a joint initiative in order to create a specialised workforce in Very Large Scale Integration (VLSI) layout design, required by the semiconductor industry.
The programme aims at tapping talented postgraduate and undergraduate science students and generating awareness about the opportunities that exist for basic science passouts, in specialised fields like VLSI design.
Initially, the focus will be on M.Sc students from UoP’s department of electronic science (DoES) and undergraduate students will later be covered later in areas such as custom layout for integrated circuits (IC) design.
VLSI refers to the process of creating integrated circuits by combining thousands of transistor-based circuits in a single chip. The semiconductor industry is a major user of this process to create products that have wide-ranging applications across the industry.
While trained manpower employability for India’s VLSI design industry is pegged at 7.80 lakh by 2015, the industry continues to grapple with a huge demand-supply gap for competent professionals.
As part of its corporate social responsibility activity, Intel runs a dedicated higher education (IHE) progamme that focusses on technology curriculum, research with universities, student programmes and technology entrepreneurship. It is through IHE that Intel got into the country’s ‘first-of-its-kind tie-up’ involving a university electronic science department.
While the tie-up was jointly announced by Pandit Vidyasagar, director, UoP’s board of college and university development, and Manav Subodh, corporate affairs head for Intel India’s south-west region — the foundation was laid last year when UoP DoES and Intel started a pilot project to train 10 M.Sc students in VLSI layout design.
Senior DoES faculty member S.V. Ghaisas said, “Intel helped us install the Cadence software tools required for IC mask design studies, which is a key stepping stone to advanced learning in VLSI design.” The select students underwent a six-month special internship programme at Intel’s India headquarters in Bangalore as well as at other companies like Sasken, he said. “Barring one student, who went for MS studies abroad, the rest got jobs at leading companies,” said Ghaisas.
Interacting with reporters, Subodh conceded that joint initiatives like these needed to be scaled up further to meet the huge manpower requirement. “What we have attempted here is to explore the niche areas where the universities have a strength and work towards structured programmes,” he said. The idea was also to retain the interest of basic science students in such niche areas, he added.
On his part, Vidyasagar said that the tie-up forms a key element of the UoP’s thrust on greater industry-institute interaction. “We want such joint initiatives to work as sort of integrated finishing schools that ensure direct employability for students,” he said.
Source:TOI
September 23rd, 2008
Indian biotechnology firm Biocon has been ranked the seventh-largest employer among the top 100 biotechnology companies globally by Med Ad News, according to a statement issued by Biocon.
Med Ad News is a global pharmaceutical magazine and is regarded as one of the most respected journals in the segment.
“This is a validation of our consistent effort to attain global leadership. This also highlights the true potential of this sector in a country like India. This industry will be a key driver in India’s progress towards economic development,” Biocon Chairman and Managing Director Kiran Mazumdar Shaw said in a statement.
These companies provide the best numbers to track the
progress of the sector, according to Biocon.
The statement further says, “The companies have been ranked by the number of employees, and Biocon at the seventh rank is the only Asian company to feature in the list.”
The total number of persons working in Biocon in 2007 was around 3,000, which is 17 per cent higher than the total number in 2,543 in 2006, according to the report.
In terms of revenue, Biocon has been ranked at 20th position among the top 100 biotechnology firms. It has reported USD 2.7 crore revenue in 2007, according to the report.
The company has incurred around USD 1.1 crore as research and development expenses in 2007 and is at 88th position in terms of overall spending among the top 100 biotechnology firms.
September 22nd, 2008
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