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Dell sets up unit for govt, education buyers

PC Maker Creates Specialised Product Portfolio for the $500-M Market Growing 50% A Year

PC maker Dell India has set up a new dedicated division and created a specialised product portfolio to tap the $500-million government and education market in the country
“We have formed a new vertical — government and education— to win businesses in the government, public sector enterprises and higher education space. We have also readied the product portfolio, including a full range of laptops and notebooks, X86 servers and projectors. Our Chennai plant, which is on track, would further add to our competitiveness in catering to this market,” said Dell India country head Rajan Anandan.

The government and education market is growing at a CAGR of 50%. According to industry estimates, government and public sector enterprises would account for 20% share of the domestic PC market.

“There is greater IT implementation in PSUs now, the defence IT expenditure is also rising and with the e-governance initiatives taking shape across the country, we see great opportunity in the market,” added Mr. Anandan.

Dell has started providing its products including PCs and servers to the Indian Railways, the Tamil Nadu government undertaking, Elcot and Union Bank of India, it is now looking at enhancing presence in the market and tying up with national and regional system integrators for installation.

The Rs 2,000-crore Dell India witnessed a growth in revenues of over 50% and volume growth of 70%in2006. “While large IT/ITeS companies will continue to provide the largest chunk to our revenues, we have been steadily expanding into other areas. Two quarters ago, we entered the home and small business space. The government and education space is the next opportunity,” said Mr. Anandan.

Dell recently inaugurated its R&D centre in Bangalore, its largest outside its main Austin facility, and a centre of excellence for Dell’s enterprise solutions and products.

According to IDC figures, the domestic IT market docked revenues of Rs 61,761 crore in 2006 and is expected to touch Rs 116177 crore by 2010.

IBM misled investors on expenses: SEC

IBM misled investors by overestimating the impact of stock-based compensation expenses on quarterly earnings in 2005, the US Securities and Exchange Commission said on Tuesday.

The securities regulator made the statement as it reached a settlement with International Business Machines Corp, in which the company agreed not to commit future disclosure violations.

The SEC did not impose any monetary penalties and IBM, the world’s largest technology services company, did not admit or deny the SEC’s findings in the settlement announcement. The SEC’s order makes no finding that IBM committed securities fraud.

“IBM misled investors by failing to disclose information that would have allowed them to accurately determine the impact that the company’s decision to expense stock options would have on its financial results,” SEC associate director of enforcement Scott W. Friestad said in a statement.

“The facts here are particularly troubling because the disclosure decision was driven, in part, by management’s perception of how the news would be interpreted by analysts,” Friestad said.

In an April 5, 2005, conference call, IBM led analysts to believe that the company expected stock option expenses to reduce first-quarter earnings by 14 cents per share and to reduce full-year earnings by 55 cents per share, the SEC said.

During the conference call, IBM had showed a chart showing its first quarter 2004 earnings per share would have been 14 cents lower, and its full-year 2004 earnings per share 55 cents lower, had the company expensed stock options at that time, according to the SEC.

IBM, however, actually expected stock options expenses to reduce earnings by only 10 cents per share in the first quarter and by only 39 cents for the full year, the SEC found.

IBM’s first-quarter earnings, reported nine days after the conference call, fell short of average analysts’ estimates by 5 cents per share, a big miss for the company. IBM shares fell more than 8% the day after the reported earnings.
Some analysts later complained that IBM, in effect, had led them to believe that the stock options’ impact would be larger than it actually was, disguising the magnitude of the earnings shortfall.

The SEC said IBM had wanted the gap in its stock options expense estimates to offset a previously announced, unrelated increase in pension expenses.

IBM did not want analysts to reduce their estimates for the stock option expenses because it would have increased their expected growth rate for the company, which would have been hard to achieve because of the pension expense, the SEC said.

“By engaging in this conduct, IBM violated the reporting provisions of the federal securities laws,” the SEC said in its order.

An SEC enforcement agent said the two sides had had discussions over several months before reaching the settlement.

HCL to jostle with PE duo for Cambridge

Promoters Seeking Exit Price Of Rs 160 Per Share

THE final line-up of suitors for the $420-million acquisition of Cambridge Solutions— among the biggest In the Indian tech space— has HCL Technologies pitched against buyout private equity giants Carlyle and Permira. ET had first reported the names of Carlyle and HCL.

But the entry of Primera, the largest European buyout fund, appears to be recent, say sources. If it retains interest, this could be Permira’s first India play. The company, which mopped up about $ 12 billion last year, has battled US buyout funds Blackstone and KKR in deals across the US and Europe.

Unconfirmed reports suggested that Blackstone could compete against Permira for the third contender’s slot. The last-mile battle is expected to be a close one with HCL going ahead with the bid and completing due diligence with KPMG on its side.

The Cambridge board is expected to name the successful bidder by this month-end or early July. Cambridge’s promoters, led by former Pepsi chairman Chris Sinclair, could be seeking an exit price of $4 (around Rs 160) per share, marking about 2 5 % premium on the current price.

Around 42% of the company is expected to be on the block as the promoters, except single-largest individual shareholder Ramesh Vangal, are mulling an exit. The promoter block holds 59.15% stake currently while Mr. Vangal has 18%. When contacted, Cambridge said “no comments".

Carlyle, meanwhile, is seen joining hands with Mr. Vangal in mounting a bid. Mr. Vangal is likely to keep his stake intact for now and opt for a phased exit, with observers drawing parallels with MphasiS’ Jerry Rao’s EDS pact.

MTNL to set up IT Park in Noida

STATE-OWNED MTNL, which offers telecom services in Mumbai and Delhi, is diversifying its businesses to venture into developing IT parks. The company, which has prime property in both metros will build IT parks and lease this infrastructure to software, BPO and KPO companies.

MTNL has also dropped plans to hive off its land bank into a separate company.
Its first project, which is slated to kick off soon, will see the PSU build a 80,000 sq ft IT park in its land in Noida — Core Knowledge Park (CKP). The company has also informed the Bombay Stock Exchange that the Board of Directors has approved the development of its Noida property.

“This will be developed by a consortium selected by the company against an open Expression of Interest (EOI) floated by the company,” the PSU said in its filing with the BSE . MTNL sources said that the company expected returns from the CKP in terms of rentals from December 2008, while adding that the developers for the project have already been short listed. While industry sources said that MTNL had awarded the contract to develop the CKP to two consortiums—Shanghai Urban Construction Group and IDEB—this could not be independently verified by ET. Interestingly, MTNL’s CKP project is coming up at Noida’s sector 62, where other developers such as DLF and Unitech are also building IT parks.

MTNL is likely to adopt a model where the developers of the project will not got a stake, but will instead be provided with a revenue sharing arrangement. This implies, both MTNL and the developers will share the rentals on the property—the company is currently working out the time frame and the ratio of revenue sharing, sources said.

At the same time, MTNL is also in the process of identifying developers for developing its land banks in both Delhi and Mumbai. In its next project, it is likely to develop its 1 lakh sq ft plus property in Mumbai, sources added. MTNL has been looking at extending its business overseas in addition to venturing into new avenues at home as it has been under intense pressure from the ever increasing competition in Delhi and Mumbai markets. Additionally, the company’s revenue streams from telecom services are limited as these metro markets are facing saturation and is also witnessing a fall in landline connections.

Apax looks to take control of Patni for $800 million

UK Investor in Fray with Other PEs, IT Firms

UK-BASED private equity major Apax Partners is learnt to be interested in picking a controlling stake in Patni Computers Systems for over $800 million. Sources dose to the development said two mid-tier Indian IT companies and some private equity (PE) funds are also in the fray.
These moves come as Gajendra and Ashok Patni, who are co-founders and together own 28% stake in the Mumbai-based company, are looking to exit. PE firm General Atlantic too is looking to sell 16%.

When contacted by ET, Apax Partners India head Neeraj Bharadwaj declined to comment on the possible investment. A company spokesperson said: “Patni Computer Systems has not been informed by any of its large investors of their intent to offload any stake in the company. As a policy, the company does not comment on market speculations.”

Sources close to the development said like any other private investment in public equity (PIPE) deal, Apax is willing to pay an 8-10% premium over the existing share price for 44% stake in the company, The Patni scrip is currently trading at around Rs 540. If the deal materializes, it will be Apax’s first in India. The investment will be carried out through its $15-biIlion global fund.
Sources said two mid-tier Indian IT firms have also started talks with Patni. IBM too is said to be eyeing the company though there is talk that the US company may prefer the organic route for growth in India.

The Patni deal is expected to be among the biggest in India’s IT space. Incidentally, the largest PE deal in India has also been in this segment, when US PE giant Kohlberg Kravis Roberts bought over 85% in Flextronics for nearly $ 900 million last year.

Patni appoints Stones as VP

NEW DELHI: Global IT services provider Patni .Computer Systems on Monday announced appointment of Brian Stones as executive vice-president for its European operations. “We are witnessing a strong growth with tremendous opportunity in Europe and hence significant investments are being channeled to strengthen our operations in the region,” Patni Computers COO Atonal Sattawala said in a statement.

Jangoo Dalai resigns rirom Cisco India

BANGALORE: In less than seven months at the helm of Cisco India, Jangoo Dalai has put in his papers as president of its India and Saarc region operations. Jangoo Dalai, who has been with Cisco since last nine years, came in place of Rangu Salgame in November, 2006. Cisco has announced that as an interim move it has appointed Naresh Wadhwa as the president. Cisco India has seen a spate of senior level executives leaving the company in the last several months and it is likely that Mr. Dalai is joining a pre-IPO company.

NIC in talks with Google & Yahoo for search engine

THE National Informatics Centre (NIC) is in talks with global majors such as Google and Yahoo for improving its search facilities across government websites. NIC, which is part of the ministry of communications and information technology, is a network provider to state and Central governments, and currently hosts over 5,000 websites which offers different search engines.
A need for advanced search engines comes as all data compiled by the government is hosted by NIC. For instance, results of all examinations such as CBSE and civil services, the online mobile phone directory of those customers who are part of the do-not-call registry, birth, death, caste, domicile and residence and land records are all hosted by the NIC.

Currently, the government-owned body has a tie up with Netscape for some search engines. While NIC builds some search engines, others are built by private companies at a cost or NIC or the ministry to which the site belongs picks up an open source.

Confirming the development, a senior official in the NIC said: “NIC is exploring the market for better search engine technologies". With improved search engines, NIC wants to bring about greater speed and intelligence content. “We are examining what Yahoo has to offer, and so far Google only supplies search engine hardware outside the country. We are asking Google if they would consider selling their products in India,” the official said.

A source in the ministry said that while the search engines provided by Netscape was working fine, the platform was basic in nature. “The agreement with Netscape is working fine, but new advanced search engine technologies are being explored for which talks are on with both Yahoo and Google for its development,” the source said. Once the terms are settled, NIC will move to this new platform. The next step will be to migrate all NIC’s existing applications to work on the new search engines.

Infosys to launch Finacle as service offering

THE country’s second largest software exporter Infosys is planning to launch its universal banking solution Finacle as a service offering along with its other products to expand its market reach.

“We have been evaluating the option of offering Finacle as a service. Currently, we are in the process of validating market demand and “formalising our strategy across geographies for such an offering,” Finacle vice-president business head Merwin Fernandes told FIT.

Technically, the company is already capable of offering Finacle in SaaS (software-as-a-service) model, he said adding, announcement to this effect would be made at an appropriate time. SaaS is a software distribution model in which applications are hosted by a vendor or service provider and made available to customers over a network, typically the internet.

However, he said, this offer would be made available only with large deal size.

Finacle platform offers core banking, e-Banking, treasury, wealth management, CRM, and cash management requirements of retail, corporate and universal and banks worldwide solutions, he said.

Talking about growth, Fernandes said, last year Infosys Finacle added 12 new clients to reach a total of 91, out of which around 37 banks were part of top 1,000 global banks.
In 2006-07, Finacle registered revenues growth of 45% at $118.91 million and had been maintaining a CAGR growth of 58%.

Infosys Finacle recently bagged an order from Bahrain-based Bahraini Saudi Bank (BSB) for replacement of its legacy core banking solution.

Quoting a survey, Fernandes said core banking replacement market is estimated to grow from $13.9 billion in 2004 to over $34 billion by 2010.

The Middle East is a key contributor to this growth as banks in the region are increasingly investing in the IT infrastructure to compete with local and foreign competition, Fernandes said, adding that it is one of the fastest growing markets among the targeted geographies.

Finacle addresses key banking issues in the region like legacy systems, emerging regulatory requirements, enhanced security and data protection, risk management and stria legal and religious laws on banks (Islamic Banking), he said.

India shares the smile with global markets

As Many As 19 Global Equity Benchmarks Scale Historic Peaks

IT IS that phase of the bull market when it looks like nothing can go wrong. As many as 19 equity benchmarks across the world are at their all-time high levels. A few of these, including India, recorded new highs the previous week and are currently hovering around their peaks. This phenomenon is nothing new; it has been witnessed at least once in each of the previous four years.

Market analysts can tell you any number of reasons why equity markets are doing well. But what most investors would want to know is: what the good times last?

“The key behind such a broad upmove is that one can find basket of stocks trading at 5% yield across emerging markets,” says BSE broker Ramesh Damani, who is of the view that markets across the globe are building up steam for a further rise.

Indian equities too are at new highs and while the perception they may have risen less than some oi the other that it’s expensive emerging markets in 2007, analysts claim India is on a better footing. This is despite India being perceived to be expensive relative to peers. “Multiple secular trends make India an oasis in a global welter of fears, even as expectations, for both investors and corporates, have outrun short-term prospects,” says a report by brokerage house Enam Securities.