Satyam's will look hard at acquisitions before leaping
Satyam Computers will adopt a 'guarded and cautious' approach in making strategic investments in overseas firms.
376, 209, 304, 7685
Since its inception in 1987, Satyam Computers (Satyam) 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 taken a strategic decision to focus on e-commerce and web-enabling tools.
The chairman's statement that it will not rush into making acquisitions seems to highlight the fact that Satyam will employ the acquisition route only if the benefits are evident and not vague. It will invest in companies promoted by venture capital firms to help them translate ideas into products. The company will adopt the outright acquisition route only if there are definite synergies with the target business.
The company will offset the decline in Y2K revenues by undertaking more e-commerce and web-enabled businesses. Satyam will list its stock on NASDAQ next year.
Satyam's look-before-you-leap strategy makes a lot of sense. There are a lot of software startups the world over, and it would be unwise for the company to acquire companies for the sake of acquisitions. That is why the company has decided to target acquisitions on certain criteria, and not indiscriminately.
A lot of Indian software majors have adopted the acquisition route for growth. This could put some pressure on their peers to acquire companies so as not to be left behind. Therefore, it is critical that software companies outline the objectives and criteria before they go in for the kill, else they will be saddled with companies with little synergies with their core business.
Satyam's successful foray into products (Vision Compass), combined with the strong performance of its ISP arm (Satyam Infoway) and spurt in onsite revenues have prompted analysts to flag the stock as a 'BUY'.
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: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407