India’s Satyam Computer Services Ltd. expects revenue from the U.S., its biggest market, to show growth from the second half of next year as the beleaguered software company starts cashing in on increased technology outsourcing spending, an executive said.
“Right now is a period where we are investing selectively in focus areas,” Atul Kunwar, president of business development and customer relationships, told Dow Jones Newswires in a recent interview. Growth in revenue “will start coming in from the second half of next year which will be significant.”
Satyam, based in Hyderabad, is in the midst of recovering from one of India’s biggest corporate scandals. In January 2009, the company plunged in turmoil after its founder and then chairman, B. Ramalinga Raju, confessed to overstating the company’s profits for years, using a fictitious cash balance of more than $1 billion.
After the scandal, Tech Mahindra Ltd., a joint venture between India’s Mahindra & Mahindra Ltd. and U.K.-based BT Group PLC, bought a controlling stake in Satyam in April 2009 and rebranded it as Mahindra Satyam.
The company became eligible to bid for several deals that required the firm to declare financial details after it reported quarterly results earlier this month for the first time since reporting July-September 2008 earnings.
Mr. Kunwar said the company’s recent investments in employees and technology will help it get large contracts.
This should also help Satyam receive contracts where revenue won’t depend on the number of people working on each project, thereby helping to improve the company’s operating margins.
Once India’s fourth-largest software exporter by sales, Satyam hasn’t been able to take advantage of the strong rebound in demand for outsourcing services which its rivals have been able to cash in on, because of the scandal that has tarnished its reputation. In October, top technology companies Tata Consultancy Services Ltd. and Infosys Technologies Ltd. posted strong July-September quarter results as business volumes continued to rise.
“We do encounter this problem [of tainted image] when we are bidding for new deals,” especially large IT contracts, Mr. Kunwar said.
For the quarter ended Sept. 30, Satyam posted a net profit of 233 million rupees [$5.1 million], or 0.20 rupees a share, on revenue of 12.42 billion rupees. The U.S. accounted for 58% to 60% of Satyam’s total revenue in the just-ended quarter.
In the current quarter ending Dec. 31, new contracts will diminish after the U.S. Thanksgiving holiday, said Kunwar. However, before Thanksgiving, the company saw “a lot of action in the U.S.,” in terms of deal proposals, which the clients will consider in the next month, Kunwar said.
“Some more deals are going to come into the pipeline starting January,” said the executive.
The company said it is chasing multiple large contracts worth more than $50 million over three to five years, and several smaller deals in the $10 million-$30 million range with some below $10 million.
The large deals are mainly in the media, technology and entertainment space, manufacturing and banking, as well as financial services and insurance segments, he said.
“It takes roughly six to nine months for business to start getting realized [into revenue],” Mr. Kunwar said.
Source:http://online.wsj.com/article/SB10001424052748704700204575643670201560234.html?mod=googlenews_wsj
