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Home > Business > Stock Market News > Hot Pursuits

Digital GlobalSoft softens on institutional selling

April 02, 2003 15:41 IST

Digital GlobalSoft slipped off its day's high of Rs 596.40 to dive into the negative in afternoon trades.

The scrip of the software major is now (13:10 IST) trading 0.84% lower at Rs 576.90. Huge volumes of over 16.86 lakh shares were witnessed on the counter so far. In the five sessions from 26 March 2003, the stock has lost 13.9% from Rs 669.80 .

As per market rumours, Alliance Capital is actively selling on the counter.

The selling has been prompted by talk that the company's parent Hewlett Packard is likely to cut billing rates by 10%. In general, the ongoing war between the US and Iraq and expectations of disappointing results as well as poor future guidances from frontline tech companies for FY 2003-04 has dampened sentiment for most leading techs .

Already there are reports that IT spending by corporates in the US and Europe will drop 17%. The Indian IT sector receives over 65-75% of its export revenues from the US and a prolonged US-Iraq war will hit Indian IT companies' earnings. In addition there have been recent reports that spending by major US companies was sluggish in February 2003, with a rise of just 4.3%, below the December 2002 rate of 5%. This is significantly below the 6-7% that IT managers were expecting.

Digital GlobalSoft, previously known as Digital Equipment (India), is a globally focused software development and services company. It has an independent charter for growth and functioning, and enjoys the unique advantage of having Hewlett-Packard Company, one of the leading IT companies in the world as a major investor, customer and supporter.

Earlier, at the global level, there was a merger between Hewlett-Packard (HP), Heloise Merger Corporation and Compaq Computer Corporation. A new entity called Hewlett-Packard Company took shape on 7 May 2002 in the US. Compaq Computer Corporation is the holding company of Compaq Computer Holdings UK, that owns 51% equity stake in Digital GlobalSoft.

For the third quarter ended 31 December 2002, Digital GlobalSoft recorded a 9.7% rise in net profit to Rs 27.01 crore (Rs 24.62 crore) on net sales growth of 26% to Rs 109.98 crore (Rs 87.28 crore). On a sequential basis, the company's performance was more redeeming - a 27% rise in net profit on a 16% increase in sales. The company reported strong sequential growth rates in both Hewlett- Pakard (HP) and non-HP revenues. HP revenues grew by 11% QoQ thus arresting declines in growth rates witnessed during the last few quarters. Non-HP revenues grew by 35% during the quarter. Contribution from HP revenues stands reduced to 78% from 85% last year and 81% during September 2002.

The company added 29 new customers during the quarter under review, including a significant multi-year, multi-location comprehensive outsourcing e-business application deal from HP. Operating margins during the quarter improved by 350bps to 31%, primarily due to increased contributions from offshore revenues. Revenues from offshore increased to 37% from 34% during the previous quarter. The company also recruited 252 employees taking its employee strength to 2003. 189 recruitments were undertaken in the services segment, largely in the e-application and enterprise solutions segment, while around 71 people were added in DCC.

<P><A href="http://www.rediff.com/money/2003/apr/02capmkt.htm" target=_new><B>More Hot Pursuits</B></A>



Source: www.capitalmarket.com

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