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Pentafour: Going Global

Jul 6, 1999

Pentafour is among the largest software companies in India. The company has commercial associations with IBM (for mainframe computing), Apple (for graphics), Silicon Graphics (for animation and digital imaging), Kodak (visual effects) and Price Waterhouse Coopers (for insurance). Its operations consist of on-site consultancy, training, projects and product development. Pentafour, which generates a significant portion of its revenues from the United Sates, plans to enter into the European and Asian markets by setting up these subsidiaries. Consequently, the company's business portfolio will be hedged, as it would not be too dependent on any one country.

Since these arms are being set up as 100% subsidiaries, and the markets are new to the company, Pentafour would have to incur significant expenses before it is able to establish a presence in these markets. Therefore, there is a fear that the company might be spreading itself too thin, rather than concentrating on a few markets at a time.

Market View:
Pentafour operates in the high margin multimedia business, in which there is lower competition. Moreover, the company has strong relationships with global media companies giving it a competitive advantage over other players. Consequently, the stock has been rated as a 'BUY'.

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