The first quarter performance of Satyam Computer Services, the fourth largest IT company in the country, was one of the best in the industry. However, despite the good show, the markets reacted negatively as the company did not revise its dollar guidance upwards, a clear indication of the slowdown in the US markets.
Ram Mynampati spoke to Shivani Shinde on the impact of the US slowdown, the company's growth strategy and market expectations.
Clearly, the market was not happy with the company's dollar guidance.
We have to look at the realities and the environment we operate in. We have sufficient momentum to revise the guidance upwards and will do so if the need arises. Clearly what is happening in the US market was one of the reasons for the lower guidance. I don't think we can segment markets any longer and the happening in the US market has influenced other sectors as well.
As for the markets, they have a mind of their own and we do not like to interpret what they do. We, as an organisation, believe in delivering what we have committed and we have done so far.
What has been the impact of the slowdown?
There are different things happening in the US market, like high energy cost, consumer spending slowdown and unemployment, and each of these are impacting other industries.
The high energy cost has impacted the transportation business in the US, which has impacted us and we have seen some cut backs here. We have seen many big car manufacturers shutting down operations. The impact percolates down and hence we get affected.
But we have seen a good growth in the insurance, retail, non-automotive manufacturing sector, media and entertainment sectors globally. Going ahead we have to look at the changes in the market-level segment rather than on the individual customer.
In some cases, the last revenue might never come back but what is important is whether the industry is making the investment from a strategic point.
Are you in talks with some of the clients for long-term transformational deals?
We are in talks with some clients. Some of them are in the range of $30-50 million (around Rs 128-210 crore) and our endeavour is to close them as quickly as possible.
With the US going slow, how are the other markets panning out for Satyam?
Better growth is coming from outside the US "" such as Canada, Australia, West Asia, China and APAC (Asia Pacific). Moreover, these are also becoming good delivery centres given the unique nature of these geographies.
Brazil, for instance, is an attractive market. So we have set up two development centres in the Brazil. It will also be the hub for our Latin American strategy. India, as a market, was not a focus for us as there was no money to be made due to its lack of maturity.
However, things have changed now and we are aiming 10 per cent revenue from India by 2010. Currently, emerging markets contribute 40 per cent to the overall revenues and US 60 per cent. We want this to be 50:50 in a few years.
Is there any pricing pressure?
We are happy to say that though there are a few customers who have given us price increase in this quarter, there is no price reduction this quarter. We do have a case where the customer has asked for renegotiation of price. We still need to decide on this...
The BPO business had some problems this quarter. Do you see this changing in the next quarter?
The impact of BPO business on the corporate revenue was a one-off incident and it will come back to us. We will start doing the same (volume of) business. We believe that it will grow and will be cash positive in this year.
We are also making a qualitative shift from voice-based to transaction-based and high-end knowledge process outsourcing segment.
So, would acquisition be the route for these scale ups?
We are always looking for a good target. We feel acquisitions need to give strategic fit, like some capability in the finance and accounting (F&A) area or something that takes our BPO business to the next level.
The company has a cash reserve of Rs 4,800 crore. The reason why we made small acquisitions was because they did fit in our strategy.
