In a move that would help it consolidate its position in the growing product engineering services (PES) space, Mindtree, the IT and R&D services company, has signed an agreement with Kyocera Wireless Corp (KWC) to acquire its Indian subsidiary, Kyocera Wireless (India).
The acquisition involves an upfront payment of about $6 million (about Rs 29 crore), other than payments linked to the revenues to be acquired from Kyocera during 2010-11 and 2011-12. MindTree expects this acquisition to contribute about $9 million in revenues for the period October 2009 to March 2010, with profit after tax in the range of 13-15 per cent.
California-headquartered KWC is a global producer of mobile handsets and wireless products, and is part of the $11.5 billion Kyocera Corporation. Established in 2003, Kyocera Wireless (India) employs about 600 people in India, with its development centre located in Bangalore.
The company provides wireless product development, software engineering and product testing services for KWC’s global product portfolio, other than developing customised wireless handsets for Indian telecom service providers. The terms say KWI would continue to provide engineering services to KWC and other Kyocera entities, post the sale.
“We are pleased to enter into this agreement with MindTree,” said Yasuyuki Yamamoto, General Manager of Kyocera Corporation’s Corporate Communication Equipment Group. “This allows Kyocera to improve its cost structure and competitiveness, while providing MindTree a strong engineering resource, especially in the field of software for mobile devices,” he added.
Following its organisation-wide restructuring announced in March this year, MindTree had identified PES as one of five key areas of growth. The business unit which comprises R&D and outsourced product development services, is headed by Janakiraman S as the president and Group CEO. The company had been keenly exploring the inorganic way of growth, to boost the new practice.
MindTree CEO & MD Krishnakumar Natarajan said the acquisition of KWI was a significant milestone. “As part of our PES business, MindTree offers design and technology services that range from chip to cloud.
KWI, according to MindTree, will operate as a fully-owned subsidiary of the company from October 1, ‘subject to certain closing conditions being met’. Besides, Samartha Nagabhushanam who had been heading KWI as president from its inception, would continue to head the company as president and CEO. He would report to Janakiraman in this new role.
Analysts say that KWI’s acquisition strategically fits MindTree’s growth objectives, and strength in telecom domains. “MindTree has traditionally been strong in embedded technologies, and its acquisition of Aztecsoft helped acquire strong capabilities in software domain.
This (KWI’s) acquisition indeed complements them and helps build a strong vertical capability in the telecom domain. MindTree has done quite a bit of work on short range wireless technologies and this acquisition should help it offer a portfolio of services across a wide range of wireless technologies,” said Karthik Ananth, Engagement Manager, Zinnov Management Consulting.