IT firms fish for overseas acquisitions

The banking turmoil in the US and UK is gnawing away at the growth of Indian IT firms. Yet, domestic IT firms are expected to make at least six to eight more acquistions, similar to the bid for Axon by Infosys Technologies and HCL Technologies, over the next 12 months as they try to shore up their top lines in a bid to meet their revenue guidance.

For instance, more than half of the 11 IT companies that provide full-year revenue guidance run the risk of missing their numbers (in dollars) this year, according to Credit Suisse analysts. Their new estimates are now at the lower end of guidance for Infosys and Satyam and below guidance for MindTree. Among the large caps, they say that HCL Tech provides the highest downside, followed by Wipro and Satyam and TCS. Since economists believe the bottom is still a couple of quarters away, it could lead to an elongated period of slowdown for these firms.

Another significant trend is the move of Indian IT firms to rise up the value chain — to compete with the likes of IBM, Accenture and HP (EDS) — with these buyouts, which give them "complementary skills, added capability besides business transformation (when IT becomes a critical part of the business model) capabilities".

Source:
BPO Watch