For Sasken, Rs110 crore Nokia account is up in the air

For Bangalore-based telecom software solutions firm Sasken Communication Technologies, what seemed like a distant fear a month ago is evolving into a nightmare as uncertainty clouds its largest client account — Nokia — which contributes around $25 million or `110 crore in annual revenues.

Sasken founder and chief executive Rajiv C Mody said in an earnings call on Thursday that while he is unable to say what the impact there would be on earnings because of Nokia restructuring, it is possible that the entire $25 million may be at risk.

DNA had first reported on February 14 that Sasken might feel the pain as Nokia restructures its operations to remain competitive and recover lost share in mobile handset market.

“Thank you, we need it,” Modi told analysts on Thursday as they signed off wishing the company good luck. He added that the company is “mentally prepared” for the worst and that the management is “on the job” to ensure that there is “minimal impact on the shareholders.”

Sasken which announced its earnings for fiscal 2011, on Thursday, saw its revenues falling 5% to `546 crore while profits fell 3% to Rs73 crore.

Shares of the company fell 5.7% on the Bombay Stock Exchange to close at Rs164.25 on Thursday when the broader market fell 0.8% to close at 19,292 points.

On Wednesday, much to the surprise of Sasken, Nokia announced that it is forming “a strategic collaboration with Accenture that would result in the transfer of Nokia’s Symbian software activites, including about 3,000 employees to Accenture.”   

As part of Nokia’s efforts to reduce research and development expenses by over a billion dollars, it is also looking to reduce its global workforce by about 4,000 employees by the end of 2012.
However, Sasken is yet to receive any formal communication regarding the fate of its work contract from Nokia, which is looking to save over a billion dollars in research and development expenses.

“Accenture has a very large work force in India, and I don’t see why they would sub-contract any work to Sasken,” said an analyst with a Mumbai-based brokerage who tracks the shares of Sasken. “I see this playing out in a negative way for Sasken,” the analyst added asking not to be named.

In February, when Finnish phone maker Nokia announced plans to ditch its mobile operating system software Symbian in favor of Microsoft’s Windows Mobile platform, it was a shocker for Sasken, which helps Nokia customise and integrate Symbian operating system (OS) for its many different handset models.

Nokia is buffeted with competition from low-cost Asian brands in entry to mid-market phones while in the higher end smart-phone market it is facing stiff competition from Apple’s iPhone and others such as Samsung, LG and HTC who sell phones that run on Google’s Android OS platform. The strategic tie-up with Microsoft was Nokia’s answer to competition.

While Mody said that Sasken is working on diversifying its services portfolio by offering android based solutions, he declined to quantify the worth of Android-related work citing competition related confidentiality of the information.