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| Edited By: Amit Tripathi |Source: DNA |Updated: Mar 17, 2018, 02:08 AM IST
Infosys Technologies, India’s largest IT firm by market capitalisation, is evaluating prospects of forming a joint venture with the IT solutions and services unit of German manufacturing firm Siemens AG, a source familiar with the development said.
Infosys officials could not confirm the development. “We have not looked into it. When it comes up we will see,” V Balakrishnan, chief financial officer, Infosys, told DNA Money.
However, the source maintained that teams in Infosys are aware of the development in Siemens and “are secretly working on it”. The source added that the deal evaluation is in preliminary stages.
At the end of FY2008-09, Infosys had a free cash flow of over $1.1 billion.
The Siemens unit may be available at an attractive valuation owing to its recent lacklustre financial performance, the source pointed out.
Siemens’ IT Solutions and Services was badly hit in FY2009. The unit’s revenue fell to euro 1.15 billion from euro 1.46 billion in FY2008. More importantly, the unit failed to earn profits while it had managed a 45million euro profit in the previous year. The order pipeline also reduced from euro 1.39 billion in FY2008 to euro 1.09 billion in FY 2009.
The Siemens management recently decided to carve the business out as a separate unit.
Earlier this month in an interview to Wall Street Journal, Siemens CFO Joe Kaesar said the German firm was evaluating “all options” — from a joint venture, to IPO, to hiving off the IT solutions and services business into a separate unit by July 1, 2010.
On December 10, Siemens appointed Christian Oecking as acting head of Siemens IT Solutions and Services until the appointment of a new CEO, saying that the cross sector business focus (as an independent IT service business) was the need of the hour.
“Siemens announced last week that the cross sector business would be more closely oriented to the needs of the IT market in view of unrelenting pricing and competitive pressure in the IT business,” a Siemens AG press release said.
Infosys, on the other hand, aims to increase its revenue contribution from Europe from the current 25% to 40%, in line with what chief executive officer Kris Gopalakrishnan’s told analysts in a December 7 presentation.
The IT firm currently earns about 62% of its revenue from the US, 25% from Europe and about 13% from rest of the world.
