IBM develops new protocol, users can talk to web

Giving a new dimension to the internet, the Indian research arm of the US-based IT giant IBM has developed a technology that will allow users to talk to the web and create voice sites using mobile phones.

"People will talk to the web and the web will respond. The research technology is analogous to the internet. Unlike personal computers it will work on mobile phones where people can simply create their voice sites," IBM India Research Laboratory Associate Director Manish Gupta told PTI.

For this technology, IBM has developed a new protocol -- Hyperspeech Transfer Protocol (HSTP) -- which is similar to the Hypertext Transfer Protocol (HTTP).

"India now has over 360 million cell phone subscribers. Last month we added 15 million," he said pointing out that the research technology targets ordinary mobile phone users, all of whom may not be literate.

The spoken web is a network of voice sites or interconnected voice and the response the company got in some pilot projects in Andhra Pradesh and Gujarat and the kind of innovations that people came up with were just mind-boggling, Gupta said.

Fidelity shortlists IBM, HP for its tech captive

IBM and HP are the two firms that the global financial services provider Fidelity Investments is understood to have zeroed-in to sell its technology solutions captive unit in India. The financial services firm has ruled out Indian players like Infosys, Wipro among others, said a source close to the development. The deal could be close to $100 million (over Rs 500 crore) with an assured revenue component or a multi-year outsourcing deal to the buyer.

“The deal should close by the end of March as the due diligence has started. Fidelity has ruled out Indian players as the company wants an firm that has global presence in at least 40 countries,” said the source. The technology solutions group with close to 2,400 people, is part of Fidelity Research & Management Company (FMR) India, which provides captive back office support to Fidelity in the US.

When contacted, an official spokesperson said: "I cannot comment on the specific names but I can confirm that we are evaluating sourcing options with leading global technology service providers that will help us maximise the value we can offer to our customers, shareholders and employees in the long term. We are always looking for opportunities to expand our global footprint.”

The captive--Fidelity Business Services India-- was set up in India in 2001 in Gurgaon and later expanded to Bangalore in November 2003 and subsequently into Chennai as well. Along with a captive Fidelity also has existing relationship with Indian IT vendors like. As a part of its consolidation process the company had closed its Gurgaon centre last year and had asked it employees to relocate at Bangalore and Chennai.

Meanwhile IBM and HP spokesperson said that they do not comment on rumours and speculation.

The Fidelity company spokesperson said the sale of the technology solutions operations captive was not being done due to cost pressures but as “...part of our global business transformation strategy to explore options to optimise our technology delivery model, including that contained in our captive unit in India”.

In a similar trend last year, Citigroup and Aviva--insurance firm--sold their captives to Tata Consultancy Services (TCS) and WNS respectively last year.

Scattered layoffs in IBM can touch 4,600: report

Technology giant IBM is resorting to "scattered layoffs" and the total could be nearly 4,600 employees in North America even though the company has reported surprisingly strong quarterly profits in January, a media report says.

"Big companies also routinely carry out scattered layoffs that are small enough to stay under the radar... And IBM is one such company," the New York Times said.

Interestingly, after reporting strong quarterly profits in January, its Chief Executive Samuel J Palmisano in an e-mail message to employees said that while other companies were reducing jobs, his company would not. "Most importantly, we will invest in our people," he wrote.

But the next day, the New York Times said, "More than 1,400 employees in IBM's sales and distribution division in the United States and Canada were told their jobs would be eliminated in a month. More cuts followed, and overall, IBM has told about 4,600 North American employees in recent weeks that their jobs are vanishing."

Quoting J Randall MacDonald, IBM's senior vice-president for human resources, the newspaper said, "It was routine for the company to lay off some employees while hiring elsewhere

IBM-Sun: Part cheap, part fearful

IBM is bracing for impact. The tech conglomerate is pondering a bid for Sun Microsystems. Sure, combining the two big producers of computer servers promises substantial cost cuts. And Sun’s depressed valuation and substantial cash pile are no doubt tempting for the blue-chip IBM. But Cisco’s entrance into the already crowded server market is probably the key - especially for Sun.

First the cheap part, for IBM at least. Prior to the technology giant's interest leaking, Sun had lost about 70% of its market capitalisation over the course of a year.

Assuming IBM paid a premium to Sun's undisturbed price of around 100%, as news reports suggest, IBM would be paying an extra $3.7bn for control.

That should pale beside potential synergies. If IBM could cut 10% of Sun’s bloated cost base, it would save $1.25bn a year. The value of these savings today should be more than double that premium. That suggests a deal could look like a bargain - as long as Sun’s decline doesn’t accelerate.

Then there's the defensive aspect. Servers already bring in low margins for producers, and they keep falling. Virtualisation software means one server can now do the job of many. Users are also switching to cheap off-the-shelf hardware instead of more expensive – and profitable - specialised kit.

This last trend has particularly hurt Sun. The worldwide server market declined 3% in 2008, according to research outfit IDC, while Sun’s hardware sales fell 7%. Luckily for Sun, its smaller services business is steadier. But with hardware sales stagnating almost across the board in major markets, a deal with IBM could stop Sun disappearing over the horizon.

The market shifts won't be lost on IBM, either. Aside from anything else, Cisco has now entered the server market. For the four firms that dominate the market - IBM, HP, Sun and Dell - that means a tough business is about to get tougher. Hooking up with Sun - especially at a modest price - is one way to take on a new rival

Satyam board meets; no word on short-list

The government-appointed board of Satyam Computer Services today met to scrutinise the bids for the troubled IT major but did not make any names public

The board, along with investment advisors Goldman Sachs and Avendus, met “to weed out the prospective suitors that submitted expressions of interest (EoIs) but failed to meet the criteria, including showing the required cash back-up”, said a source close to the development.

Board Chairman Kiran Karnik walked away without commenting. Sources said six-seven bidders had been shortlisted.

Yesterday, three Indian players, Larsen & Toubro, the Spice group and Tech Mahindra, had independently confirmed that they had completed the second round of the bidding process by putting in Rs 1,500 crore in an escrow account. Global majors like IBM and Hewlett-Packard are also understood to have entered the second round, but this could not be independently confirmed. Other names floating included KKR Private Equity Investors.

Based on the EoIs, the eligible bidders will be given access to certain business, financial and legal diligence material relating to Satyam after they execute a non-disclosure and non-solicitation agreement, a stand-still agreement and a “no-claims” undertaking.

iGate, which had participated in the first round of bidding, backed out from the second round. Earlier, the Hindujas group had decided to opt out of the race.

All the bidders are understood to have asked the board for a complete disclosure of all liabilities. Tech Mahindra has even sought a record of the forex losses and whether the company has any inter-corporate deposits. Most bidders, however, believe the bidding process is a “shot in the dark” since the restated financial statements are unlikely before June, despite a huge team of Deloitte and KPMG forensic experts on this job.

Forrester says L&T, IBM top in Satyam race

Based on the available data and interactions with some bidders and Satyam Computer Services’ clients, independent technology and market research firm, Forrester, believes that engineering giant Larsen & Toubro and IT major IBM are front-runners to acquire the troubled company.

Among large Indian business conglomerates, “Larsen & Toubro is a clear leader,” said Sudin Apte, head of Forrester India.

By and large, all firms in the running would be in a position to pay the required money, possibly even a premium, said Forrester, adding that L&T had the most service overlap and relevant IT industry experience. Its reputation, ability to manage mergers and acquisitions, and relationships with government agencies made it the most likely winner, said Apte, adding, “Its early approach to investors like LIC will make it easier to pull through the 31 per cent equity deal. Others in this camp have limited IT services experience.”

Among onshore global IT services firms, IBM was the front-runner, said Apte. “Though most firms in this group are not officially commenting, multinational services firms have emerged as an interesting group from the clients’ perspective. Factors like size, client relationship and service line overlap are in favour of firms like IBM. Most firms in this camp also have a good experience of handling mergers and acquisitions (M&As) in India,” he said.

IBM bought Daksh BPO and a niche testing firm. Since most foreign firms in the race are headquartered in the US, they will score well on clients’ corporate governance concerns, says Apte.

On private equity (PE) firms, Apte said: “While PEs can surely pull off the deal commercially and even retain Satyam’s independent status, clients will lack confidence in this group. Doubts about PEs selling stakes immediately after the lock-in period, giving preferential treatment to their portfolio companies over existing clients, and lack of technical IT service businesses will be other challenges.”

General Atlantic Partners, he said, stood tall in this group, with its long experience offshore and first-hand experience of investments in Patni and Hexaware. This camp also has the potential to use this deal as the first step in future industry consolidation

Satyam: IBM, WL Ross tie-up buzz gets stronger

Scam-hit company may prune revenues by 10-15%.

Even as the shroud of secrecy over the bidding process for Satyam Computer Services stays, the buzz around two independent bidders — IT giant IBM and Wilbur Ross & Co, the private equity (PE) firm promoted by billionaire investor Wilbur Ross — joining hands has grown stronger over the past couple of days.

The buzz refuses to die down even though other PE players, investment bankers and analysts say such an alliance is highly unlikely.

“IBM and WL Ross entering into an agreement is not possible, as IBM is a listed company and cannot do something like this. But WL Ross may look at selling to IBM if it is successful in getting Satyam,” said a banker not connected with the case.

On the litigation issue, he said, “Litigation is not a big issue for WL Ross and there is a perception that they will be able to find their way out of the litigation maze. The idea is to buy Satyam and stay invested for three-four years, work on it by getting a new management, and then sell to a player like IBM. In all probability, they may be working with IBM on this,” a leading PE player said on condition of anonymity.

While IBM (which is understood to be in the race through a law firm) said “it does not comment on speculation”, a highly-placed source in the company said, “IBM has traditionally never joined hands with funds to make an acquisition”. Besides we have a lot of cash to go alone, he added.

Wilbur Ross, meanwhile, is understood to have completed the due diligence of the scam-tainted IT company. When contacted, a company official declined comment.

Ross, known for restructuring failed companies, specialises in leveraged buyouts. He first invested in India in 2006, when he put $37 million in OCM India. His second investment was $100 million in SpiceJet in August 2008.

Satyam, incidentally, is expected to prune its revenues by 10-15 per cent before it announces its audited results for the current financial year, according to sources privy to the development.

The IT outsourcing firm’s revenues for the second quarter of FY09 stood at Rs 2,819.29 crore, as against Rs 2,031.72 crore in the corresponding quarter last year, a year-on-year growth of 39 per cent.

The government-appointed board of Satyam has sought an extension till June 30 to disclose the company’s third quarter (October-December) results, which are currently being restated following the accounting scam that broke out in January this year. “An approval from the exchanges is expected anytime now,” said a company official.

“The action has now shifted to Mumbai from where the Satyam board members, along with the company’s investment bankers, Goldman Sachs and Avendus Capital, are participating in the process through virtual conferences,” said a source from Satyam. The bidders for Satyam can inspect the documents virtually, using video conferencing and the internet through Satyam “data rooms”