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Nortel’s bankruptcy a warning for Indian IT

Nortel’s bankruptcy a warning for Indian IT
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First Published: Fri, Jan 16 2009. 12 57 AM IST
Updated: Fri, Jan 16 2009. 12 57 AM IST
Bangalore: The bankruptcy filing of Nortel Networks is an indication of a flagging global telecom industry and is cause for concern for India’s software industry, which earns nearly one fifth of its export earnings from telecom and hi-tech industries, analysts said.
Norton is a customer of India’s top three information technology firms—Tata Consultancy Services Ltd (TCS), Infosys Technologies Ltd and Wipro Ltd—which earn between 0.5% and 1.5% of their revenues from it.
Canada’s Nortel Networks Corp. and its US subsidiary Nortel Networks Inc. both filed for bankruptcy protection on Wednesday in their home countries, listing $11.6 billion (Rs56,956 crore) in consolidated assets against debt totalling $11.8 billion as of 30 September. “While (the) Nortel bankruptcy itself should not have a significant impact on the financials of TCS, Infosys and Wipro, we believe it is a concern for the Indian IT sector as it reflects the weak health of the telecom original equipment maker (OEM) sector,” analysts at JPMorgan India Pvt. Ltd said in a note to clients on Thursday. “Wipro, with 10% exposure to telecom OEM, could be hurt more than TCS and Infosys.”
According to Nortel’s bankruptcy filings, both Infosys and TCS have trade receivables (or money due from Nortel) worth $2.9 million each, while Wipro has receivable worth $3.1 million, JPMorgan said.
Wipro, which also partners Nortel in system integration work in Asia, said in a statement that the outstanding amount from Nortel is $15 million.
“(In) the current conditions we are going through, this (Nortel’s filing) is a start. That doesn’t seem to end any time soon,” said Nareshchandra Singh, principal analyst at technology researcher Gartner Inc.
Meanwhile, mobile telephony firm Bharti Airtel Ltd said Nortel, which has provided it technology, has assured uninterrupted support and service.
Mint’s Shauvik Ghosh in New Delhi, Bloomberg and Reuters contributed to this story.
raghu.k@livemint.com
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First Published: Fri, Jan 16 2009. 12 57 AM IST