Mumbai:
Infosys Technologies, the country''s second-biggest software-maker, has dismissed
media reports as "speculation" that it would bid for Paris-based consulting
firm Capgemini, a firm with more than three times its annual sales. Newspaper
reports had said the Bangalore-based IT bellwether would use cash reserves of
Rs6,200 crore (about $ 1.5 billion) to fund the acquisition. "We
don''t comment on speculation," Infosys spokeswoman Bani Paintal Dhawan said.
Infosys, which
has grown from $500 million in annual sales to $3 billion in five years, was founded
26 years ago by seven software professionals and now employs more than 70,000
people. The company is trying to expand and sharpen its competitive edge in the
global information technology market. It
aims to catch up in the consulting business with bigger information-technology
firms such as IBM and Accenture. Infosys
reported a 56.6 per cent jump in net income at Rs3,850 crore ($ 943 million) on
sales up 45.9 per cent at Rs13890 crore. But
the company''s consulting arm ended the year with a loss of Rs110 crore. While
Infosys may want to build the consulting business, Capgemini may be "too
big" for it to acquire, analyst say. The European consultancy had $10.35
billion in annual sales last year, compared with Infosys'' $3.1 billion. But Capgemini
made half the profit logged by Infosys and commanded less than half its market
value of $27 billion. An
acquisition of Capgemini, however, will reinforce Infosys'' business in Europe
and help build key relationships for its IT business. The
report comes less than three months after Infosys shuffled key management positions,
promoting chief executive Nandan Nilekani to chairman and setting him free from
day-to-day operations to map growth strategies. Chief
operating officer Kris Gopalakrishnan was named chief executive. The
company, a pioneer of the outsourcing boom in India''s software industry, is preparing
for greater competition amid rising wages and a strengthening rupee that is denting
export earnings. The
buzz of a possible bid from Infosys lifted the share price of Capgemini in the
European bourses. But Paris-based dealers were sceptical, arguing that Capgemini''s
surge was probably more to do with strong figures from Oracle in the US, and the
third-quarter earnings announcement due from Accenture. Infosys
has remained a quiet player in the acquisition market but is sitting on large
cash reserve of around $1.5 billion. Wipro and TCS, the two other major Indian
IT service vendors have cash reserve of around $1 billion and $500 million respectively.
Of late, Infosys
has been trying to build its consulting portfolio through organic growth and
the acquisition of Capgemini would help it expand its consulting business in Europe
rapidly. But
Capgenimi is known as a legacy IT service vendor, rather than a full-service consulting
major. Analysts say Capgemini''s outsourcing revenue is more than its consulting
revenue and acquisition of Capgenini may not fulfil Infy''s desire to enhance its
consulting revenue rapidly to maintain its high profit margins.
|