Infosys back on the growth curve
IT bellwether Infosys is back with a bang. After slipping to the number four position in terms of corporate earnings last quarter, the company has finally made a desperate move to do what it does best- be a market leader. The acquisition of Swiss multinational Lodestone comes at a time when many feel that Europe is the pandora’s box of the global economy.
We at Ishan have put the issue on the table for dissection and these are our conclusions-
1. Continental Europe is going through a bad patch and stock prices are at a low level. So it makes sense to buy a stake in the companies of Europe on present date.
2. The transition from Infosys Technologies to Infosys has to be a continuous story than a one time event and taking this ahead it has to enter into not only new markets but also new business verticals like public services, health services and cloud computing.
3. The client list has got to keep rolling. Lodestone had a good number of clients almost 200 spread across Germany, France and Austria. With so many shock waves hitting the global economy at random, depending on the same clients is foolishness.
4. Infosys was sitting pretty with a cash reserve of Rupees Twenty Thousand crore. Even after this deal which shall cost Infosys, Rupees One Thousand nine hundred thirty two crore , they will still have a lot of cash which can be used for expansion of the business empire.
5. A fast emerging trend in the demand for IT services for system integration of corporate firms is SAP. Siemens has been a traditional leader in this segment. Lodestone has 850 employees of which 750 are SAP consultants all of whom shall now be the prized assets of Infosys.
6. The client list of Lodestone is impressive to say the least. BMW, Allianz and Kimberley Clarke shall add to the corporate image of the firm and reposition itself from being a provider of cost value to being a provider of utility value.
7. HCL Technologies has made its intentions very clear with their acquisition of Axon. Appeasement is a luxury which Infosys cannot afford. Europe is crumbling and the battle for market share between Infosys and HCL cannot be ruled out. It is a battle between two of India’s biggest IT companies which is being fought on European soil.