Hughes Software Systems was steady on Thursday, after witnessing intense volatility in the last few sessions.

The stock of the telecom software firm was up by 7% at Rs 144.05 on the BSE in early-afternoon trades. A good volume of 1.28 million shares was recorded on the counter. Foreign institutional investors were said to have acquired the stock.

The Hughes Software scrip had slipped to over 3-month low recently to Rs 132.35 on 27 January 2003. In the next session (on 28 January 2003), the scrip surged by 7.2% to Rs 141.90 only to decline again by 5.2% to Rs 134.50 on Wednesday (29 January 2003).

As per market buzz, telecom analysts in the US are now taking either a positive or neutral view on the US telecom sector, which has been sluggish for some time now. Some of the other stocks which have their fortunes linked to the US telecom sector are Subex Systems and optical fibre cable maker Sterlite Optical Technologies. These stocks have attracted bargain hunting at lower levels of late.

The sharp setback on the Hughes Software counter in the last few months was due to the adverse outlook about the telecom sector given by the company's management at the time of announcing the Q3 results. The scrip also fell as it was not included in the final list of scrips for the derivatives segment of the bourses. The Securities and Exchange Board of India pruned the the original list by deleting 12 scrips (including Hughes Software) citing lack of adequate surveillance by stock exchanges.

At the time of announcing its Q3 results, Hughes Software's management said the company's sales may record a 10% sequential growth in Q4 ending March 2003 from Q3 ended December 2002, but the next four quarters will continue to be difficult for the telecom sector. The company, which derives revenues from the telecom domain, has been feeling the pinch of the sluggishness in the telecom sector globally. While the management gave a guidance of 10% sequential growth in revenues for the fourth quarter, it did not give guidance on profitability.

For the third quarter ended December 2002, Hughes Software posted a 21.3% fall in net profit to Rs 11.40 crore from Rs 14.50 crore. Its total income declined by 6.2% to Rs 59 crore from Rs 62.90 crore.

Hughes Software is diversifying its revenue streams and it is working currently for foray into the banking, financial services, insurance segment. The company expects its business process outsourcing operations to grow rapidly henceforth. As the BPO operations will initially make losses, the profitability for the fourth quarter can be affected, according to analysts.

Hughes Software is a subsidiary of HNS, formerly a unit of Hughes Electronics Corporation. HNS is a networking company, dedicated to providing products and services to build and operate digital communication networks worldwide. HNS is the world leader in VSAT-based networks. HE is a world leader in the design, manufacture and marketing of advanced electronic systems. It was a wholly-owned subsidiary of General Motors Corporation, US. HNS-India Inc. is the principal shareholder in Hughes Software. The current promoter holding in Hughes Software is 55.57%, the same as on 30 September 2002.

On 29 October 2001, General Motors entered into an agreement to sell HE to EchoStar Communications Corp for $25.8 billion in cash and shares. General Motors and HE together with EchoStar Communications signed definitive agreements that provide for the spin-off of HE from GM and the merger of HE with EchoStar. However, the EchoStar bid has failed and Hughes Software's parent continues to be HNS. The management clarified that the failure of the bid may not affect the company adversely in the future.