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E-commerce drives Satyam profit this Q2

Satyam Computer Services Limited has declared an interim dividend of 15 per cent pro rata.

The record date for payment of interim dividend will be December 1.

The board met on Tuesday and approved the audited results of the second quarter for financial 1999-2000.

Total Q2 (April-September 1999) revenues stand at Rs 1.57 billion with net profit after tax at Rs 307.4 million.

Compared to second quarter results of the last financial year (1998-99), current Q2 revenues are 61.33 per cent higher and net profit recorded a 63.68 per cent gain.

Annualised EPS stood at Rs 28.94. During the quarter, all formalities relating to the amalgamation of the three subsidiaries were completed.

The results for the quarter ended September 30, 1999, and the half-year ended on that date are for the consolidated entity.

Revenues for the first half year of the current financial year are Rs 2.94 billion, an increase of 62.49 per cent over the same period last year.

The net profit after tax increased by 64.91 per cent to Rs 565.8 million from Rs 343.1 million recorded during the corresponding six months last year.

For the current quarter, on account of fluctuations in the currency exchange rates with reference to those prevalent on March 31, 1999, the total income increased by Rs 27.4 million and profit before tax by Rs 8 million.

Break-up of revenues

Two significant events characterise Satyam's performance this quarter.

First is the sharp reduction in the proportion of Y2K business to just 5.11 per cent (18.9 per cent last quarter).

The second, and perhaps more significant, is the rapid emergence of e-business for the company from 6 per cent last quarter to over 15 per cent in the current period.

Clearly, as customers gear up for Web enabling and e-commerce activities, Satyam's Y2K business is being largely replaced by new Internet related projects.

Satyam Chairman B Ramalinga Raju said: "In accordance with our strategic plan, the emphasis was on building competencies in newer technologies and horizontal segments.

These initiatives portend well for Satyam, given its large customer base and the long-term relationships it has nurtured with several of them. Our growing inroads into the Internet and e-Commerce led businesses have contributed very positively to our performance and will continue to do so in the future, too."

Ramalinga Raju pointed out: "A strategic investment that is furthering Satyam's rapid move to the new e-business opportunity is its offsite/local development centres in USA. Since several such projects require very close and frequent interaction with customers, a number of these projects tend to be driven by the offsite project teams. Over 50 per cent of projects handled by the four US Development Centers now are internet related."

Satyam added 25 new customers during this quarter, with as many as a third doing purely Internet related projects.

In order to meet the growing e-business opportunities, over 1,000 people have been retrained because of their Java programming and other Internet related skills.

During the current quarter, legacy and Y2K work account for 25 per cent of total revenues; ERP 8.39 per cent; Engineering Services 8.15 per cent; e-commerce and Internet applications 15.49 per cent with the balance coming from open systems and related technologies.

North America remains the largest source (74.96 per cent) of business, as does offshore development (72.09 per cent).

Time and material contracts accounted for 65 per cent (previous quarter 68.1 per cent) of the business with the rest coming from fixed bid projects.

Sixty nine per cent of business came from existing customers. Satyam continues to derive a significant portion of its business from its wide technology base. The ERP practice (SAP and Oracle ERP) now has 230 consultants and contributed 8.39 per cent to second quarter's revenues.

Its Telecom business is also showing a lot of promise with 12 customers and about 8 per cent of current revenue share. The telecom group has bagged a major systems integration contract to the tune of $2.5 million for implementation of billing and customer care solutions for a GSM cellular operator in Myanmar.

Marketing strategy

The global sales and marketing group is rapidly building its field sales team to address the new customer business sector.

New sales staffers have been added in the US, UK, and Japan. As a result, 65 new customers have been added in the first six months, several of them being in Fortune 500.

Relationships built with customers through the merged entity have made a positive contribution.

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