Saturday, October 12, 2002
After a disastrous first quarter in which revenues had fallen
18 per cent sequentially, Hughes Software Systems (HSS) has
turned around with a 10 per cent sequential growth in revenues
in the second quarter ended September. As expected, most of
the growth (around 77 per cent) has come from professional
services to non-HNS (Hughes Network Systems) clients. Boosted
by the expansion of its business with NEC and Nokia, and other
repeat orders, the non-HNS side of the business grew 17 per
cent sequentially.
Revenues from the parent company, Hughes Network Systems,
grew 2.8 per cent sequentially on an extremely low base. This,
too, was on expected lines as HNS's merger-related decisions
are taking longer than expected. The products business, interestingly,
grew 5.5 per cent sequentially, despite
the fact that the telecom sector has seen a bloodbath.
The good news doesn't end there. HSS's operating margin has
jumped over 10 percentage points, resulting in a 89 per cent
sequential jump in earnings. Lower staff costs as a percentage
of sales (indicating better utilisation rates) were partly
responsible for this jump in margins. But there was a seven
percentage points drop in other expenditure, which is primarily
because last quarter's `other expenditure' component included
a huge provisioning for bad debts amounting to 10 per cent
of sales. Adjusting for this, the jump in margins would be
less spectacular.
The spectacular Q2 numbers came as a reprieve for the beleaguered
HSS stock. But the optimism is expected to be shortlived,
as things haven't even begun to improve in the telecom space.
Last updated : February 2, 2004
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