Financial Daily from THE HINDU group of publications
Friday, Jan 25, 2002
Financial Daily from THE HINDU group of publications Friday, Jan 25, 2002 |
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Info-Tech
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Software Corporate - Outlook Wipro seen billing less from Lattice Group Abhrajit Gangopadhyay
BANGALORE, Jan. 24 CONTRIBUTION from Lattice Group, Wipro's top client for the September quarter, is likely to dwindle in the March quarter of the current financial year, leading to talks on whether robust ramp-ups of certain projects could offset Lattice's downside. Lattice Group accounted for 15 per cent of Wipro's revenue in its third quarter. Wipro has a three-year $70 million system integration engagement with Lattice and planned to bill $28 million by March-end. However, work on the Lattice front progressed ahead of schedule and most of the revenue earmarked for the current fiscal has already been realised. Wipro's Chief Financial Officer, Mr Suresh Senapati, said that Lattice had insisted that some portions of the integrated systems go live and hence, Wipro rushed through the project. Wipro has a maintenance contract with Lattice which would help the firm record a steady revenue in the coming quarters. Barring Lattice, the next four clients contribution among the `top five' have degrown, which reflects a strong incidence on the top client. Generally, as a de-risking strategy, most software firms try to hedge their revenues across their clientele. According to industry analysts, Wipro has "pretty good visibility'' in the system integration space following the Lattice project. Similar SI projects are in the pipeline, though they might not be of the same magnitude as Lattice. Another interesting trend that has set in is that many Fortune 500 companies, who had mandated one of the Big Five consulting firms, are insisting that the vendor work with Wipro in some form or other. This ensures greater scope for Wipro to leverage on the Lattice account in the SI space. With inherent labour arbitrage in favour of Indian vendors, Wipro could snatch a major share of global SI business, going forward. However, the concern would now be of a cramped volume growth. Wipro reported a 2.4 per cent dip in volume growth sequentially in its December quarter. The firm had earlier reported a one per cent drop in volumes during its September quarter. Such a steady fall is due to delay in ramping up of certain projects and gradual shrink of order flows from telecom equipment manufacturers - the one-time major contributors to Wipro's topline. Telecom equipment manufacturer major Nortel's share dipped to five per cent in the December quarter's revenue from seven per cent a quarter ago. Contribution from telecom equipment manufacturers fell by as much as 23 per cent, as against Wipro's estimated drop of 10 per cent in the October-December quarter revenue and is slated to fall further. Even as global telecom equipment manufacturers have been under pressure, tracking a slowing US economy and cut backs in corporate IT spending, business opportunities in the telecom service providers are on the upswing.
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