Infosys Reuters

Indian multinational software provider Infosys on Monday announced its plans to acquire Zurich-based Lodestone Holding AG for CHF 330 million ($350 million), in a move that would make the outsourcing powerhouse one of the key players in the global SAP business.

Lodestone, a global consulting firm founded in 2005, focuses on clients using SAP-enabled business software.

Infosys, often criticised for not using its $3.7 billion cash pile as of the end of June quarter, is expected to close the acquisition deal by October end. The company had last sealed a $28 million acquisition deal in 2007, when it acquired three service centres of Royal Philips Electronics NV.

Infosys said that the current deal will bolster business by adding 200 more clients from various sectors and employing 850 employees to the company's current workforce of 150,000, thus helping to bring more than $1 billion in revenue.

"A key plank of our Infosys 3.0 strategy is to expand our C&SI. This acquisition fits perfectly into that strategy. Lodestone and Infosys share a culture of unwavering focus on nurturing and maintaining client trust," Infosys CEO and Managing Director S D Shibulal said.

The acquisition comes at a time when Infosys was lagging behind in the fierce competition among several outsourcing companies. The Bangalore-based company, which follows a traditional BPO model, was chided for not making a shift to advanced IT services amidst the rise of cloud services and other computing technologies. In July, the company cut its FY13 revenue growth forecast down to half.

Though the acquisition is said to help bring the info tech giant one step closer in providing higher-value services and optimizing revenue growth, some analysts perceive the deal as not significant enough for Infosys to witness a drastic change in its earnings structure.

"This is a relatively small acquisition. The markets were expecting an acquisition of close to Rs 5,000 crore, as company is sitting on cash of Rs 20,000 crore currently. I don't expect much impact on the financials though the acquisition in the consulting space will strengthen its position in the current consulting practice," Sanjeev Hota, assistant vice-president of Sharekhan, said according to Business Standard.

Ankita Somani, Analyst - IT & Telecom, Angel Broking, is also of the opinion that the deal may not significantly benefit Infosys but said that the company is making the right decision.

"From the revenue side, the gains are not substantial but what works for Infy with this acquisition is that the company is strengthening its presence in Europe, where its other peers have significant presence. So it's a step in the right direction as the acquisition is in consulting space. Also, the revenue from consulting will see a step up with this move," she said according to the website. 

Quick Links