Newspaper reports reveal that Satyam Computers has entered into a 50:50 joint venture to form a new entity with the US$ 2 bn Detroit-based Venture Industries to provide software solutions to the auto ancillaries sector.
Since its inception in 1987, Satyam Computers has focussed on software development and infotech (IT) services on mainframes (legacy system). Close to 60% of revenues come from mainframe-related jobs. It has also ventured into the internet service provider (ISP) business by launching a company Satyam Infoway. The latter is listed on the NASDAQ.
The US$ 2 bn Venture Industries employs 15,000 people and operates out of 50 locations worldwide. Its customer base includes several global auto majors.
The new venture - Satyam Venture Engineering Services will commence operations with a start-up equity of US$ 2 m. The new venture will specialise in services to the automotive original equipment manufacturer (OEM) and tier-I and other suppliers. Satyam Computers will be offering CAD/CAM simulation and tool design to the new venture.
In many ways, this is a path-breaking move as no Indian software company has ventured into the automotive field. However, there could be some overlapping as Satyam already offers CAD/CAM services in its joint venture with GE.
In future, Satyam plans to leverage its low-cost Indian expertise to tap the global markets. In fact, Satyam through tie-ups/mergers can carve a niche in several areas like health, insurance and banking. It is with this objective in mind that the company has picked up 9% equity stake in a US firm, 'In Touch Technologies Ltd.'. The latter develops software for telecom applications.
As the company begins to offer software solutions in various fields (telecom, automotive, insurance, banking), it will broaden its perspective and will gain access to several global markets. This will speed up the expansion process that the company has outlined for itself.
Strong performance of Satyam's ISP arm (Satyam Infoway) and spurt in onsite revenues have prompted analysts to flag the stock as a 'BUY'. A 67% spurt in 2QFY2000 net profit seems to have reinforced analysts' views.
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