Xansa in Takeover Talks with Infosys?

Tascali UK reports that Xansa is in takeover talks with some companies.

Xansa is an outsourcing and technology company in UK wit £379.7m revenue and 8,600 employees. Bridgewell analyst Michael Donnelly said he was "99 percent sure" an Indian firm was behind the deal. "It could be Infosys, Wipro or Tata," he told Reuters. "They are big in low-cost India but their challenge is client contact. How do you achieve that? Buy a Western company. The Indian companies have a lot of cash to burn."

Quoting from Original Story

LONDON (Reuters) - IT services firm Xansa said on Friday that it was in advanced talks that could lead to a takeover offer, sending its shares up 37 percent.

The company said in a statement that the potential offer would be at a premium to the current share price -- which was already up 20 percent for the day by the time the announcement was made.

Shares in the group, which counts the BBC and the National Health Service among its clients, then rose further to be up 35 percent at 103 pence by 1:39 p.m., valuing it at 358.5 million pounds, according to Reuters data.

A spokesman for Xansa declined to comment further, but Bridgewell analyst Michael Donnelly said he was "99 percent sure" an Indian firm was behind the deal.

"It could be Infosys, Wipro or Tata," he told Reuters. "They are big in low-cost India but their challenge is client contact. How do you achieve that? Buy a Western company. The Indian companies have a lot of cash to burn."

Spokeswomen for Infosys , India’s second-largest software services exporter, and third ranked Wipro declined to comment.

A spokesman for industry leader Tata Consultancy Services also declined to comment.

Earlier a trader had said he had been told Cap Gemini was behind the bid, but the French IT group’s chief executive, Paul Hermelin, told analysts that there were no talks going on between the two firms.

Market rumours have also linked Cap Gemini with Infosys, but Hermelin told reporters there had been "no kind of contact whatsoever" between the companies.

Xansa reported in June that pretax profits rose 23.3 percent to 16.4 million pounds for the year to end April, below analyst forecasts.

The company is also without a chief executive, after Alistair Cox resigned to join recruitment group Hays , again in June. Non-executive Chairman Bill Alexander is currently in charge on an interim basis.

Indian outsourcing sector focuses on efficiency and productivity

Indian outsourcing sector is faced with the biggest challenge ever. The rising Rupee against dollar makes it impossible to compete with cheap labor. The wages are rising fast in India. The dollar is getting cheaper even faster than that against Indian Rupee.

The outsourcing industry in India is fighting back tooth and nail. They are focusing on getting the same work done with less number of people. Productivity and efficiency have to chip in here, says some of Indian outsourcing managers.

Infosys chief mentor N R Narayana Murthy on Friday said rupee appreciation was a macro- economic issue and called upon corporates to become more efficient, productive and reduce costs.

"I am not worried about factors which are out of my control..it is a macro-economic issue," he told reporters on the sidelines of the launch of the Abdul Latif Jamal Poverty Action Lab (J-Pal) here.

"We have to become more efficient, productive and reduce costs," he said.

The only issue the Government of India has to worry about is that it can result is massive layoffs and very high unemployment among the people employed in the outsourcing sector.

Re-bitten Infy looking at rising India

12 Jul, 2007, 0341 hrs IST,Shelley Singh & N Shivapriya, TNN

NEW DELHI/MUMBAI: In a major departure from its earlier stance of not doing any domestic IT services work, technology leader Infosys Technologies said it would bid for projects in the domestic market on a case-to-case basis. "We will take that decision on a case-by-case basis, depending on the size of the deal, the value proposition and the kind of services," Infosys chief operating officer SD Shibulal told ET in an exclusive interview after its first quarter results.

So far Infosys has been in the Indian market only for its core banking product, Finnacle, and former CEO Nandan Nilekani, had stated as recently as April 2007 that the decision to stay focused on the high margin international software business was strategic one it planned to continue with. Among the reasons the company had cited for not entering domestic market was robust global demand for IT services and the not very attractive margins for Indian IT services. The taxes on domestic IT revenue were perceived as an additional disincentive.

The company's changed stance comes at a time when the rupee appreciation has dented its June 2007 quarter profitability and operating margins have fallen by 300 basis points. It's also a recognition of the growing clout of the Indian market that could be much bigger in the future.

"Systems integration, package implementation, consulting are some of the areas we will look at," said Mr Shibulal. Apart from the rupee appreciation that has impacted the topline to the extent of Rs 287 crore, visa costs and increased salaries have contributed to 7.3% sequential rise in expenditure. While visa costs are non-recurring, the company will feel the heat of the higher wage bill even in the coming quarters. "The first quarter of the fiscal, companies typically take a hit because of the salary hikes and visa costs," said Harit Shah, an analyst with Angel Broking.

However, Infosys has managed to show a 1% increase in revenue productivity in the June 2007 quarter and Mr Shibulal said the company would manage its portfolio of services and leverage services such as package implementation, testing and consulting that command higher rates. Interestingly, the company's consulting business has shown a substantial growth, increasing to 4.9% of its revenues or Rs 184 crore in the June 2007 quarter from 4.3% of its revenues in the March 2007 quarter.

The company doubled (from four to eight), the number of its $80 million dollar clients from the last quarter to the June 2007 quarter, Mr Shibulal said. One of the consulting deals it has won is an assignment from an audit firm for transforming its audit managing process, he said, declining to reveal its value.

The biggest hit the company has taken in the June 2007 quarter is on the BPO business. Here the margins have eroded from 21-22% to 16-17%. Because the BPO business is by definition almost entirely offshore, the impact of the rupee appreciation is felt most on this business. "Because the BPO is also a new business, re-negotiation for many of the contracts has not even started. But even here the new contracts we are signing have an upward bias," said Mr Shibulal. The company is also trying to add value to BPO clients by better value extraction, getting into knowledge management services and get benefits of scale.

In the IT business, newer contracts and existing contracts coming up for renewal are getting higher billing rates, which factor the stronger rupee.

Infosys: Is the worst over?

Big day for Infosys tomorrow. The Tech bellwether will announce its financial results. We delve why these may not be the best of times for Infy.

The rupee rose more than 6 percent; salaries swelled and so did visa costs. All that's expected to show on the tech company earnings in the June quarter. Infosys might report a net profit fall from the previous quarter and it might even miss its first quarter earnings per share or EPS guidance.

Bhavin Shah, JP Morgan, said, "The EPS will come in 5-7 percent below guidance in our view; they might even revise dollar guidance up but re guidance could be revised down in revenue terms by 1%, the EPs guidance by 3% so 17-19% so EPS guidance of below 80/share."

But will the earnings revision have an adverse impact on the stock? Most brokers feel the worst is over for the sector as it enters the strongest period of the year, though some feel Infosys will stick to its 80-rupee EPS guidance.

Sanju Verma, HDFC Securities, believes, "What a lot of people are accounting is the fact that the billing growth rate year on year is likely to be 5% odd and the utilization rate, the more imp parameter is likely to see a 2% growth and i think if they both come on track it will be a huge positive"

The consensus on the street is the worst is over. But if the Infosys management says it's confident of holding on to its original EPS guidance for this fiscal the sector could see a re-rating.