Vivek Paul means business and lots of it. His vision is to make Wipro one of the top ten technology companies in the world. The goal it has set for itself is to be of the size of US $ 4 bn by 2004. Of this $ 2.3 bn will come from the organic growth and the rest ($ 1.7 bn) will come through acquisitions.
This quarter 3QFY01 saw Wipro’s listing on the NYSE. After listing Wipro’s stock is performing much better in the markets than its Indian counterparts. But this could be due to support by the underwriters, which lasts for about six to eight weeks after listing. Effectively since mid December the stock has been performing well without underwriter’s support.
We have projected a growth of 18% in revenues for the quarter ended December 2000. The contribution of the global IT services business (that accounts for 56% in 2QFY01) is expected to show an increase. This will also push the operating margin to a higher side (our conservative estimate is of 25%). The contribution of Global IT services division (operating margins 33%) will be the deciding factor. The enterprise solutions division of the Global IT services group could show strong growth. This group contributed to 51% of the software revenues in 2QFY01. 30% of its business comes from e-commerce. The advantage that this group has is that it can offer end-to-end solutions from consulting to implementation. Another advantage this group has is its systems integration capabilities that has become a pressing need for many brick and mortar companies that want a presence on the internet. The other income figure may push up the net margins. This is will be due to the interest earnings on Rs 5 bn raised through the ADR issue in October and the money is yet to be utilized.
OPM (excl. Other Inc.)
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It will be very interesting to see Wipro’s geographic distribution. Wipro has a lower contribution to its revenues from United States (65%) compared to the other software majors. The figure could go down further. In 2QFY01 the contribution of US came down to 65% from 70% in FY00. This was offset by the increase in contributions from Europe and Japan. Movement in billing rates would be the other topic of keen interest.
The December quarter was also plagued by rumors that Wipro had lost GE’s account. This account now contributes 5% of the software revenues. This figure has come down from about 15% two years ago. One of the possible causes is that Wipro had reduced the business on account of lower billing rates. Even if it is so the effect will be felt only after FY01. Therefore, we can expect a repeat performance like the last quarter. Chances are if there is a surprise it will be pleasant one.
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