Hughes Software Systems surged on Wednesday on good buying support.
The stock of the MNC telecom software major was up by 2.6% at Rs 175.20 on the BSE in early-afternoon trades. Volumes, however, were modest with 490,000 shares traded on the counter.
Wednesday's rally in the Hughes Software Systems stock comes as a part of the overall market recovery amid hopes that a US-Iraq war, which looks imminent, may be short and swift. The BSE Sensex was up 37.34 points at 3,122.25.
The HSS stock has been gaining ground in the last few sessions after bagging an order from Lucent Technologies recently. From a recent low of Rs 150.30 on 25 February 2003, the stock has surged by 20% in a few sessions to a recent high of Rs 181.75. The rally on the counter came on the back of huge daily volumes of between 1.9-4.3 million shares between 4 March to 11 March 2003. The rally came amid intermittent corrections. The stock, however, came off from its higher levels in the next two sessions to settle at Rs 170.75 on 17 March 2003. Still, the stock was up by 29% from a recent low of Rs 132.35 on 27 January 2003.
According to dealers, about 3-4 local funds including Prudential ICICI Mutual Fund, Birla Sun Life Mutual Fund and the newly launched HSBC Mutual Fund have mopped up the HSS stock of late. Their optimism stems from the outsourcing deal that HSS bagged from Lucent, dealers said.
Late February 2003, HSS entered into a $30-million outsourcing deal with Lucent Technologies. HSS will develop software for Lucent's wireless products. Under the scope of the agreement, Lucent Technologies will outsource the software development and maintenance support for selected wireless products, and HSS will set up a state-of-the-art dedicated development facility in Nuremberg, Germany, and expand its existing operations in Bangalore, India.
The project will involve HSS getting an interface with telecom service providers in Europe and China which use Lucent's GSM technology. The software component of Lucent's GSM network will be maintained and enhanced by HSS, going forward. This will involve HSS working with customers like T-Mobile in Germany, China Unicom and Saudi Telecom, among others. HSS will also set up development facilities in Nuremberg, Germany, and expand its operations in Bangalore as a part of this deal.
Meanwhile, HSS has become the first protocol stack vendor to market 3GPP Release 5 compliant software components for 2.5G and 3G networks. By achieving Release 5 compliance for its stacks, HSS has said that it has reaffirmed its commitment to comply with evolving standards, thus giving original equipment manufacturers significant time to market advantage while allowing them to focus on their core competency. Going forward, HSS plans to make all its stacks R4 and R5 compliant in the near future.
For the third quarter ended 31 December 2002, HSS registered a 21.3% fall in net profit to Rs 11.40 crore. Total income declined by 6.2% to Rs 59 crore. At the time of announcing Q3 results, the company's management said that sales may record a 10% sequential growth in Q4 ending 31 March 2003 from Q3 ended December 2002, but the next four quarters will continue to be difficult for the telecom sector.
In order to de-risk its business and create added opportunities, HSS has decided to enter into the business process outsourcing segment. This will be started as an independent operation. HSS is also diversifying its revenue streams and is working currently for a foray into the banking, financial services, insurance segment.
HSS 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 is a wholly-owned subsidiary of General Motors Corporation, USA. HNS-India Inc is the principal shareholder in HSS. The current promoter holding in HSS is at 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 HSS' parent continues to be HNS. The HSS management clarified that the failure of the bid may not affect the company adversely in the future.
