MindTree’s salvaging act sees a new helmsman

Keen to put its business back on track, mid-sized IT solutions and product services firm MindTree on Friday announced the appointment of a new chairman and a business restructuring plan, both effective immediately.

The company said Albert Hieronimus, who has been on its board as an independent director since 2006, would be taking on the role of non-executive chairman following executive chairman Ashok Soota’s formal exit on March 31.

The business restructuring plan, on the other hand, would entail dropping a few verticals and service lines to concentrate on areas where its strengths lie.

The strategy would be to shed the “broad-based approach for a more focused approach,” Hieronimus said.

“The direction (in which) we want to go is (abandon) broad-based approach for a more focused approach. The management thinks this is the right way to bring the company (back on track).”

MindTree has seen investor confidence wane following its misadventure with the acquisition of Japanese firm Kyocera’s R&D operations in India in 2009, which it had to eventually wind up last year.

The company had invested close to $4.5 million in the mobile handsets and telecom infrastructure business.

The company’s woes were further compounded by the sudden departure of Soota and loss of a $2.5 million Kyocera contract.

“I agree shareholders were irritated after Ashok Soota’s resignation. However, I would like to assure that MindTree has set targets for itself and has a strong team to make them a reality. We will surely be back on track,” said Dr Hieronimus.

Elaborating on vertical rationalisation, Krishnakumar Natarajan, CEO and managing director of MindTree Ltd, said the company would be exiting from energy and utilities in the IT services space and medical electronics in product engineering services space.

“Our strategy is to be more focused. We want to be among the top 2-3 players in the areas we chose to be in, which is really what the customers are expecting. Customers today are increasingly demanding specialisation,” he said.

Natarajan said the journey the company had set out on was not a short-term one. “I think it will take us 3-5 years to be there.”
In 2008, former chairman Soota had fixed the goal of reaching $1 billion revenue by 2014. Apparently, that target is now a long way off for the $300 million company.

And even though the stock markets reacted positively to MindTree’s announcement with its shares leaping up sharply on Friday, analysts do not seem buoyed by it. “It is too little, too late,” said an analyst with a foreign broking house, who did not want to be named.