Saturday, March 13, 2004
The stock price of New Delhi-based Hughes Software has risen
over 30% in the last couple of months, bucking the bearish
trend in the overall tech sector.
From a recent low of Rs 491 touched on 22 January, the stock
price of Hughes Software Systems (HSS) has risen over 30%
to Rs 638.60 on 12 March. While the 30-share BSE Sensitive
Index (Sensex) has gained 1.90%, the BSE IT Sector Index has
lost 4.88% in the same period. The HSS stock touched its 33-month
high of Rs 672 in the intra-day trades on 27 February. Over
a longer period, From a low of Rs 159.40 touched on 15 April
2003, the HSS stock has risen 300.62% on sustained buying
interest.
Meanwhile, most tech stocks have been trading weak of late,
tracking recent weakness in the US markets. Besides, sentiment
towards the tech sector remains edgy amid growing opposition
to the outsourcing of jobs.
Ahead of the presidential and legislative elections (in November
2004), the US Senate on Thursday voted to bar federal contractors
from using taxpayers' money to move American jobs offshore.
The measure, aimed at preventing outsourcing of US jobs to
countries like India and corporations using tax havens, was
approved by a strong majority of 70 to 26 votes. If signed
into a law, this will stop the movement of the US government
contracts for goods and services, and state government contact
work that use Federal funds.
Players feel that the backlash against outsourcing will continue
and domestic funds and institutional investors may churn their
portfolios to reduce their exposure to tech sector in the
short-term.
Recently, there were rumours that the Rupert Murdoch-controlled
media conglomerate News Corp is looking for a strategic investor
to sell its controlling stake in HSS. There were talks that
News Corp may be looking for a strategic investor as software
services does not fit in with its media and cable business,
and HSS came in its fold by way of a global takeover. Rumours
have been also that Wipro Technologies, with substantial exposure
in the telecoms vertical, may make a bid.
HSS, specialising in software for telecom companies, will
be entering other areas, the first being development of solutions
and services for mobile handsets. A leading South Korean phone
maker and Thuraya Satellite Phones have commenced using HSS
technologies.
HSS has already developed solutions in the telecom technology
areas of 3G, Spaceway and SIP. Telecom verticals contribute
a major part of the revenue of HSS. The emerging trends in
the global telecom technologies such as
Wi-Fi and 3G have opened opportunities within the telecom
handsets industry. HSS, with expertise in the embedded software
segment, is rightly place to take advantage of the opportunity.
The company is developing
communication applications in the GSM and 3G arena on leading
mobile platforms such as Symbian, Windows CE and Linux.
HSS plans to develop band-end solutions for network equipment
manufacturers, system integrators and telecom service providers
to build its capabilities in the handset market. Having succeeded
in their products business in the last few years, HSS will
raise the products business to approximately 20% of its revenues
by 2004-05.
As per market talk, the recent rise in Hughes Software has
been on huge accumulation from ICICI Securities and Reliance
Mutual Fund. Both institutions are accumulating in anticipation
of good future prospects on the back of a strong order book.
The rise in orders has been due to the success of the company's
new solution, launched in the telecom vertical
segment.
For the third quarter ended 31 December 2003, the company
reported a massive 110% rise in net profit to Rs 23.9 crore
(Rs 11.4 crore) on a 67.45% increase in total income to Rs
98.8 crore (Rs 59 crore). On quarter-on-quarter basis, net
profit increased 41.4% from Rs 16.9 crore in SQ-2003. On the
current equity share capital of Rs 16.83 crore, earnings per
share (EPS), on an annualised basis, works out to Rs 56.8.
Incidentally, the 110% rise in net profit surpassed Hughes
Software's own guidance. The company had estimated profits
to grow 60-65% and sales to increase by around 55-60%.
Following the impressive performance, Hughes Software has
now revised upwards its guidance for FY-2004. The company
has increased its profit guidance to 80%, from 60-70%. It
expects sales to grow in the range of 55-60%.
Last updated :
March 26, 2004
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