X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Wipro: Powering the Internet - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Mar 6, 2002

    Wipro: Powering the Internet

    Intel recently introduced new programmable network processors that will help telecom equipment manufactures (telcos) cut cost. The new chips will be able to run a variety of software as compared those in the past that were not flexible. This will help telcos like Cisco, Nortel and Lucent cut replacement cost for obsolete equipments as the same device can be upgraded by modifying the software. This is sure to interest telcos, especially, at a time when they are going through a rough patch.

    Telcos have been a miserable lot for quite sometime now. The providers of ‘building blocks’ (routers and switches) of the new economy were perhaps the largest beneficiaries of the IT spending bubble. When the going was good, these companies ramped up capacity i.e. employed more people and venture into a number of products. And then came the IT meltdown. While the anticipated revenues never came in, the companies were sitting with increased costs. Therefore, the immediate priority was to cut costs, which meant selling off businesses and of course layoffs.

    The ever-burgeoning need for bandwidth means that the devices have to work faster. Therefore, tasks like security screening are also being performed by the chip to save time. However, for the new chips to be popular, software that provide flexibility to chips have to be easily available. Intel is investing significant amount of money to assist software developers for developing the required applications. This is where Wipro steps in.

    Wipro will develop total networking solutions based on Intel’s new network processors. The gamut of service offerings include system design, architecting and performance measurement support. The company’s familiarity with Intel processors gives it an edge over others. Also, its significant experience in the area could help the telcos reduce time to market for their new products. The market potential for network processors is immense. According to The Yankee Group (market research firm), the market for network processors is expected to witness a compound annual growth rate (CAGR) of 66% over five years, from US $ 200 m (Rs 9 bn) in 2000 to US $2.5 bn (Rs 120 bn) by 2005. Thus, Wipro could look for strong growth in revenues from the area.

    Wipro figures in the select list of Indian companies that have chosen to address the software requirements of the networking and communications markets. Wipro Technologies, the global IT services arm of Wipro Ltd., earns 51% of its revenues from the R&D space. The revenues of the R&D services group are almost distributed equally among the three sub groups. Due to slowdown in the US economy, the revenues from the embedded systems and Internet access group have declined sequentially for the past two quarters consecutively. This is because the clients from this space are mostly telcos.

    Wipro: Taking the road less traveled

    The network processor solutions could bring some relief to Wipro embedded systems and Internet access group. However, the business environment for its clients continues to be weak. Wipro with its offshore capabilities has the low cost advantage and therefore, can pursue a cost leadership strategy. While pricing power gives Wipro an advantage over its foreign competitors, it does not have much of a competition from the Indian software industry. In the long run Wipro’s strategy to focus on technology related software is likely to be a growth driver. Though for the present, revenues from this stream continue to be uncertain. At the current market price of Rs 1,750, the stock is trading at a P/E multiple of 47x its 3QFY02 annualised earnings. The company’s valuation is one of the highest amongst the software stocks. Unless the US economy turns around, it is unlikely that Wipro will be able to grow at a pace to support this valuation in the near future.

     

     

    Equitymaster requests your view! Post a comment on "Wipro: Powering the Internet". Click here!

      
     

    More Views on News

    Wipro: A Decent Start to the Year (Quarterly Results Update - Detailed)

    Jul 27, 2017

    Digital services drive growth for Wipro in 1QFY18.

    Wipro: A Good Performance (Quarterly Results Update - Detailed)

    May 4, 2017

    Acquisitions and digital services aid growth.

    Wipro: Another Flat Quarter (Quarterly Results Update - Detailed)

    Feb 9, 2017

    Wipro has reported a 1% QoQ decrease in the consolidated topline and a 1.9% QoQ increase in the consolidated bottomline for the quarter ended December 2016.

    Tech Mahindra: Our Revised View (Quarterly Results Update - Detailed)

    Aug 2, 2017

    A better than expected turnaround in performance results in a change in view.

    Infosys: A Decent Start to FY18 (Quarterly Results Update - Detailed)

    Jul 14, 2017

    Infosys starts FY18 on an encouraging note with a stable performance.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    WIPRO SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK WIPRO

    WIPRO 8-QTR ANALYSIS

    Detailed Quarterly Results With Charts

    COMPARE WIPRO WITH

    MARKET STATS