Bangalore: Indian information technology companies, such as Wipro Ltd, Sasken Communication Technologies Ltd and MindTree Consulting Ltd, which offer chip-design services, are in an acquisitive mode to consolidate their position in the global market.
In the last two years, these firms have together made five acquisitions totalling Rs502 crore, mainly to broaden their customer base and intellectual property (IP) assets.
Until recently, it was international players who looked at India for acquisitions of third-party (independent) design companies. For instance, Spike Technologies Inc. was acquired by Qualcomm Inc., Metta Technology Inc. was acquired by LSI Corp., and a division of GDA Technologies Inc. was acquired by Rambus Inc.
The Indian Semiconductor Association (ISA) says there are about 70 independent chip-design firms.
Wipro acquired Austrian chip-design firm, NewLogic Technologies GmbH, in December 2005, in an all-cash deal valued at about Rs253 crore. NewLogic strengthened Wipro’s IP scores by providing access to 25 patent filings for complex wireless applications such as Wireless LAN (local area networks) and Bluetooth. The acquisition also added 120 specialists and provided access to more than 20 customers in the product engineering domain.
This September, Wipro made its second overseas acquisition by buying out Oki Techno Centre Singapore Pte. Ltd, a 40-employee semiconductor design subsidiary of Oki Electric Industry, in a deal estimated at Rs10 crore. Wipro gained 70 hi-tech patents in wireless communications and IP in digital TV, ultra-wideband, and radio frequency ID (RFID), as well as an entry into the Japanese market.
“These acquisitions strengthened our position in the area of wireless designs. Last two years, we have doubled our number of customers,” says Vasudevan Aghoramoorthy, vice-president, VLSI (very large scale integration)/systems design, at Wipro.
The semiconductor and wireless business are a part of Wipro’s telecom and product engineering group that accounts for 33% of Wipro’s total revenues. The firm has around 2,100 employees for chip and hardware-board designing.
MindTree, in November, acquired Purple Vision Technologies Pvt. Ltd, a semiconductor firm, for Rs26 crore. The acquisition doubled MindTree’s customer base to 30.
S. Janakiraman, CEO of R&D services at MindTree, sees acquisitions as a way to acquire more expertise in the semiconductor sector. “Customers look for one-stop shop and this acquisition enables us to meet such needs. We will look for such niche acquisitions, while pursuing organic growth.”
Sasken, which has nearly 3,700 employees and serves the wireless and semiconductor sectors, has also used acquisitions to expand its customer base. Around 25-30% of Sasken’s services revenues come from semiconductor companies.
Last year, Sasken, which has revenues of Rs477 crore, made two acquisitions in wireless communication and LAN. In the all-cash deal of Rs206 crore, Sasken acquired wireless services company, Botnia Hightech Oy. The Finnish company significantly added to Sasken’s customer profile with 11 tier I customers in Europe, including Alcatel-Lucent and Nokia Corp.
Sasken had earlier acquired Chennai-based Integrated SoftTech Solutions Pvt Ltd for Rs6.5 crore in April 2006. As a result, it gained 110 employees specializing in data networking, VOIP (voice over Internet protocol) and wireless.
Swami Krishnan, the senior vice-president for Global Business Operations of Sasken says: “With acquisitions, we could be one of the few companies who can turn out a product from paper to final product for our large OEM (original equipment manufacturer) clients.”
Poornima Shenoy, president of the industry association, ISA says this is a sign of Indian companies coming of age.
“With an increasing number of start-ups in India, we will see increased mergers and acquisitions,” she says.
“Some of the entrepreneurs and investors may not take the IPO (initial public offering) route for their exit. For such technology companies thatare not strong on scalability and branding, mergers and acquisitions work out as better options.”