Wipro Limited, a major IT company announced earlier this week that it has acquired Appirio Inc., a US-based cloud services firm, for an approximate EUR 450 million. However, declining revenue rates, revealed yesterday, remains a concern.
Wipro, India’s third largest Information Technology (IT) firm, officially announced its acquisition of Appirio on Thursday, even as it reported a drop in sales revenue for this quarter yesterday. Enabling Wipro to bring together its cloud applications process, the buyout will “create one of the world’s largest cloud transformation practices, a game changer in as-a-service and digital economy,” said the IT firm in a statement, ahead of its second quarter or July-September results on Friday. Adding to Wipro’s statement, Appirio’s Chief Executive, Chris Barbin said, “When you combine Wipro’s global scale and digital focus with our transformative worker and customer experience expertise, you create a formidable force in the industry.”
The acquisition brings to Wipro, Topcoder, a marketplace based on crowd-sourcing to connect over a million designers, developers and data scientists the world over with customers. “In a digital world, as consumer behaviour and expectations are reshaped by experiences, companies are recognising the need to transform how they engage with customers and employees by leveraging the power of cloud,” said Wipro Chief Executive, Abidali Z. Neemuchwala.
On Friday, Wipro announced its revenue growth for the second quarter. The consolidated net profit reportedly fell to EUR 280 million for the three months compared to EUR 300 million for the same period last year. However, Neemuchwala added, “We delivered Revenues in constant currency at the top end of our guidance range.” Addressing the press, Jatin Dalal, Chief Financial Officer of Wipro, said, “We maintained margins in Q2 despite the impact of salary increase for an incremental two months due to strong operational improvements in automation-led productivity, offshoring and utilization. As we look forward, the demand environment is mixed in a seasonally weak quarter affected by furloughs and lower number of working days.”
Europe holds the key
In the second quarter, Wipro’s business in two of its largest markets, the US and Europe, saw mixed results. A rate of 1.6 pc improvement in the US, which brings more than 54 pc of the total business, was reported. However, a 6 pc decline in Europe was observed, which accounts for 24 pc of the total revenue. Wipro’s newest acquisition might help improve the situation, with hundreds of employees under Appirio’s Dublin and London offices coming in. Appirio’s partnership with leading global brands such as Coca-Cola, eBay, Facebook, Home Depot and Sony PlayStation may also prove crucial.
Wipro has initiated and received several partnerships and recognitions with companies across several European countries in the very recent past. If these engagements are followed through and put in place successfully, the European market may spell further success for Wipro. Recently, a multi-year engagement was agreed upon with The Highland Council, UK to transform their core IT infrastructure and services and to transform education in schools in the region. Earlier in September, a three-year IT contract with the Norwegian transportation company, NSB group, was undertaken. Wipro also entered into a global partnership with the French-origin company, Witbe.
Wipro has guided its IT revenues to be in the range of EUR 1,760-1,795 million for the third quarter, ending in December. Tapping into existing clients and contracts as well as a boost from newer alliances might help Wipro grow during this period that is traditionally considered a slow quarter for IT.