The Bangalore-based company said that the contract cancellation by the Japanese company was not related to the earthquake that hit Japan earlier this week.
Software services exporter MindTree has lost an information technology contract from Japanese firm Kyocera, resulting in a quarterly revenue loss of about $2.5 million, or a little over Rs11 crore, according to the company’s chief financial officer Rostov Ravanan.
The Bangalore-based company said that the contract cancellation by the Japanese company was not related to the earthquake that hit Japan earlier this week.
“We were working on behalf of Kyocera for a client of theirs, who has ended their relationship with Kyocera,” Ravanan said. “The revenue loss is about $2.5 million for the current quarter.”
MindTree has been in the news following the sudden departure of its chairman Ashok Soota in the last week of January.
Prior to the cancellation of the contract, the Kyocera account — one of MindTree’s larger clients — used to generate about $4-$4.1 million on a quarterly basis. That revenue run rate is expected to come down to $1.15 million.
Starting in late 2009 when it acquired Kyocera Wireless’ research and development (R&D) operations in India for an upfront payment of $6 million, MindTree had a bumpy association with Kyocera. Along with the acquisition, MindTree also took on board about 600 employees of the Kyocera R&D centre here.
Part of the rationale behind the acquisition was to get into designing and selling mobile handsets, which has since then been shelved as the company realised that the new venture requires more capital investment than it could afford.
“Now that the services contract that came along with the acquisition is also slowing down drastically, we have written off Kyocera account’s strategic nature that management had assigned to it immediately after the acquisition,” said an analyst with a Mumbai-based domestic brokerage who tracks MindTree’s shares.
“In fiscal 2012, we expect this account to decline even further.”
Since Tuesday, at least two brokerages - IIFL and Kotak Institutional Equities - have downgraded MindTree to a ‘Reduce’ rating.
Shares of the company closed at Rs373.35 on Wednesday on the Bombay Stock Exchange, up 0.26% over Tuesday’s close.
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