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Nortel move a blow to Sasken

Last updated on: January 16, 2009 10:37 IST

Telecom software solutions provider Sasken Communication Technologies, which derives close to 10 per cent of its revenues from Nortel, is expected to a take a big hit following the filing of bankruptcy protection by the North American telecom equipment maker.

Nortel on Tuesday had filed for Chapter 11 bankruptcy protection. Chapter 11 is the 11th chapter of the US Bankruptcy Code which allows a company that can't pay its debts to reorganise under court supervision. When a company files for bankruptcy under Chapter 11, it continues to operate, but major business decisions have to be approved by a judge.

Other than Sasken, Nortel works with other Indian IT vendors including Wipro and Infosys. However, unlike Sasken, these companies have a relatively smaller exposure to Nortel. Sasken has also informed that Nortel is one of the top five customers for the company.

Apart from being a client of Sasken, Nortel is also a key investor in the company, holding over 10 per cent stake which it had bought in 2005. The company has invested close to $10 million to acquire the stake. Even before the filing of bankruptcy by Nortel, there was talk in the industry that Nortel is exploring a possible exit from Sasken.

Nita Revankar, CFO, Sasken, said, "We have got a communication from the client (Nortel) today that it's business as usual for them; so there is not need to panic." On the possibility of Nortel selling stake in Sasken, she said, "We don't have any information on that."

US-based venture firm NEA has about two per cent stake in Sasken. Vinod Dham, who was a member of the erstwhile the Satyam board, is also a member of the Sasken board.

Sasken, during the recent past, has been hit by one crisis after another. The company recently closed down a division which was into a specific product development and has set aside close to Rs 100 crore (Rs 1 billion) for various write-offs.
BS Reporter in Bangalore
Source: source
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