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Satyam Computers
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Businessline
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BUSINESS LINE: India: Tech sector divergence to continue

Businessline. Chennai: Dec 17, 2000. pg. 1

Abstract (Summary)

* More significant was that the company managed a 30 per cent growth in revenues and earnings
quarter on quarter. With the scale of operations becoming larger, the focus may be on this aspect, as it
would be the right indicator of the company's success, or otherwise in scaling up operations.
Profitability may be at levels similar to the previous quarters. The company's ability to move up the
value chain may be neutralised by higher employee costs (especially as it had a high attrition rate by
its standards and would also have to foot the cost of new manpower yet to be deployed full scale).
Inevitably, other frontline stocks may invite comparison with Infosys.

* One IT stock where the numbers and its quality would be keenly awaited is that of Satyam
Computers. The stock has been marked down sharply in the last 3-4 months, though in the past
month it has managed to consolidate at around the Rs 325 level. Perhaps more than any other IT
stock, the earnings announcement of Satyam Computers may be the closely watched one.

If the July-September quarter was the first one after the launch of Kaun Banega Crorepati? by its rival
STAR Plus, this may well be the quarter in which the magnitude of the impact may become clearer.
Zee has far fewer programmes in the top 20 and top 50 than at any time in the past as STAR Plus has
muscled in with good back-up programming to take advantage of the opening provided by KBC. Sony
has also held its ground.
 » Jump to indexing (document details)
Full Text

(839 words)
Copyright Asia Intelligence Wire from FT Information Dec 17, 2000

THE next earnings season is creeping up the market and investors as 2000 rolls over. The corporate
sector will start unveiling its report card for the October-December quarter. The earnings season will
start at a time when the market has notched some gains in the last two months.

Most old economy stocks did well and had a good time.

It was a rather muted quarter for the technology sector, including telecom and media. With the Nasdaq
going through one of its worst phases, the technology sector was sidelined. Notably, however, it did
not suffer declines a la the Nasdaq.

Of equal importance has been the sifting in terms of differential valuations in the technology sector.
Though this process began some time ago, the trend became pronounced in the latest quarter. So,
what does the October-December quarter hold for the technology sector?

* The trend of wide divergence between the performances of various companies in the technology
sector is likely to continue. So far much of the divergence has been sharply focussed in the second-
and third- rung stocks.

* The last quarter was characterised by indifferent performance by companies such as Mastek,
Geometric Software and PSI Data Systems.

In fact, Geometric issued a profit warning that led to a sharp fall in its stock price.

* The trend of divergence may well become more pronounced in this quarter as the medium-scale
companies try to scale up operations.

* Among the front-runners, it will be interesting to see if Infosys Technologies can maintain its rapid
growth. In the first two quarters, the company reported very good growth rates compared to the
corresponding period in 1999-2000.

* More significant was that the company managed a 30 per cent growth in revenues and earnings
quarter on quarter. With the scale of operations becoming larger, the focus may be on this aspect, as it
would be the right indicator of the company's success, or otherwise in scaling up operations.
Profitability may be at levels similar to the previous quarters. The company's ability to move up the
value chain may be neutralised by higher employee costs (especially as it had a high attrition rate by
its standards and would also have to foot the cost of new manpower yet to be deployed full scale).
Inevitably, other frontline stocks may invite comparison with Infosys.

* One IT stock where the numbers and its quality would be keenly awaited is that of Satyam
Computers. The stock has been marked down sharply in the last 3-4 months, though in the past month
it has managed to consolidate at around the Rs 325 level. Perhaps more than any other IT stock, the
earnings announcement of Satyam Computers may be the closely watched one.

As for the media sector, it is perhaps the first quarter where there will be a sizeable number of
companies putting their earnings on the table. Quite a few such as Mukta Arts, Balaji Telefilms, Adlabs
and Creative Eye have come out with IPOs. Expect these companies to come up with good numbers
as it would be the first quarter after listing.
But the growth rates may be not anywhere near levels that could be sustained and justify the valuation
of many stocks in this sector.

But the focus is likely to be well and truly on Zee Telefilms. For some time now the company has been
reporting indifferent revenues and earnings. And most certainly not of the kind and level that would
justify even its present price earnings multiple of around 100 times.

There would be concerns over quality also.

If the July-September quarter was the first one after the launch of Kaun Banega Crorepati? by its rival
STAR Plus, this may well be the quarter in which the magnitude of the impact may become clearer.
Zee has far fewer programmes in the top 20 and top 50 than at any time in the past as STAR Plus has
muscled in with good back-up programming to take advantage of the opening provided by KBC. Sony
has also held its ground.

An additional factor may well be the problems of Zee's own competing product - Sawal Dus Crore Ka.
Though the stock has suffered significantly as almost all private sector funds have moved to pare
exposure, the earnings may be watched closely both for the quantum of performance and quality and
the sustainability of reported numbers and growth rates.

In the telecom sector, one expects Himachal Futuristic and Global Tele-Systems to manage good
numbers, while MTNL may be the one to watch out for as its share took a beating in 2000. VSNL has
enjoyed a good run in the market, and if earnings numbers are impressive, the stock may well
consolidate.

Overall, in the earnings season, the information technology, telecom and media sectors may well lead
to a further discrimination in the valuation accorded to various stocks. The surprises - positive and
negative - may well come from small and mid-sized companies, though Zee and Satyam Computers
bear a close watch.

S. Vaidya Nathan

Indexing (document details)

Companies: Satyam Computers

Publication title: Businessline. Chennai: Dec 17, 2000. pg. 1
Source type: Periodical
ProQuest 65281828
document ID:
Text Word Count 839
Document URL: http://proquest.umi.com/pqdweb?
did=65281828&sid=4&Fmt=3&clientId=97393&RQT=309&VName=PQD

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