The Hindu Business Line : Sasken may buy Nokia’s R&D unit in Germany

Bangalore-based Sasken Communication Technologies Ltd, a global provider of software and support services for the communications industry, has decided to re-examine the product portfolio and align it with market realities.

The company also confirmed that it is likely to acquire an R&D unit of Nokia in Germany. Mr Kannankote Srikanth, President and COO, said the unit is linked to connectivity software and has nearly 30-40 employees. While many formalities are yet to be completed, he said “we are pretty excited” about Nokia’s choice of Sasken and added, “it gives us a whole new market opportunity in terms of their significant platform.”

The company also plans to have Special Economic Zone (SEZ) space in Chennai and Bangalore and expects them to be completed in the first quarter of fiscal 2009.

Re-alignment

Speaking at a conference call with analysts following its third-quarter results, the transcript of which is available in the National Stock Exchange Web site, Mr Rajiv C. Mody, Chairman and CEO, Sasken, said its products business “is choppy in nature” due to the fact that its product solutions “inherently have a large selling cycle before reaching a point of predictability.” He said the management of Sasken has decided to “re-examine the product portfolio and align it with market realities.”

He said while the flagship product line, the S-series, continued to have good market demand, the M-series product line has reached a mature phase in its technology cycle. Hence, while the company continued to support its ongoing contract, it was looking “to explore new business model that can leverage the expertise that has been built.”

He said the E-series product line was created to take advantage of the growing market share of Chinese Original Equipment Manufacturers and Original Design Manufacturers. While this has proved to be successful, “the deeply entrenched power of regional suppliers’ has come in the way of successfully pursuing a displacement strategy.” So in the coming quarter, Sasken would take a view on the “risk profile of this product line and take appropriate actions thereafter.”

Growth opportunity

Mr Mody saw growth opportunities with the service providers in the North American market. He said the semiconductor industry, which was going through a phase wherein silicon vendors were looking to add value through software, would provide a huge opportunity.

Improved margins

Ms Neeta Revankar, Chief Financial Officer, referring to the question of margins, said margin improved by 1.5 per cent — from 13.2 per cent EBITDA in the second quarter to 14.7 per cent EBITDA in the third quarter this year — due to some improvement in bill rates andin utilisation. The growth in revenue has largely come from volume growth on the services side rather from pricing increase that was in “lower single digit.”

Asked about the deals on the pipeline in the services side, Mr Mody said while he saw continued sluggishness in the network equipment side, he saw about 20-25 per cent growth in the handset and silicon side.

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