Oracle Bought Indian Software, Not Cheap Labor: Andy Mukherjee
For those who equate India's strength in computer software with its vast army of cheap engineers, Oracle Corp.'s decision this month to buy a controlling stake in I-Flex Solutions Ltd. must have come as a surprise.
Oracle Chief Executive Larry Ellison, who shelled out $909 million for I-Flex, clearly was interested in something other than a high headcount.
The Mumbai-based company employs 5,500 people. By contrast, Tata Consultancy Services Ltd., India's No. 1 software exporter, has 44,000 people; Oracle itself has 9,000 engineers in India.
I-Flex's revenue of 11.4 billion rupees ($260 million) makes it a mid-sized company in a nation where each of the top three software exporters has sales in excess of $1 billion.
Besides, I-Flex's profit dropped 86 percent in its fiscal first quarter from a year earlier. That's highly unusual in India. Infosys Technologies Ltd., the country's No. 2 software exporter, had its worst quarter in recent years in the three months to September 2002, when net income rose 12 percent.
So what did Ellison see in I-Flex when he bought Citigroup Inc.'s 41 percent stake in the company for $593 million and agreed to make an open offer to other shareholders for an additional one- fifth of the equity?
The answer is: intellectual property.
For those who equate India's strength in computer software with its vast army of cheap engineers, Oracle Corp.'s decision this month to buy a controlling stake in I-Flex Solutions Ltd. must have come as a surprise.
Oracle Chief Executive Larry Ellison, who shelled out $909 million for I-Flex, clearly was interested in something other than a high headcount.
The Mumbai-based company employs 5,500 people. By contrast, Tata Consultancy Services Ltd., India's No. 1 software exporter, has 44,000 people; Oracle itself has 9,000 engineers in India.
I-Flex's revenue of 11.4 billion rupees ($260 million) makes it a mid-sized company in a nation where each of the top three software exporters has sales in excess of $1 billion.
Besides, I-Flex's profit dropped 86 percent in its fiscal first quarter from a year earlier. That's highly unusual in India. Infosys Technologies Ltd., the country's No. 2 software exporter, had its worst quarter in recent years in the three months to September 2002, when net income rose 12 percent.
So what did Ellison see in I-Flex when he bought Citigroup Inc.'s 41 percent stake in the company for $593 million and agreed to make an open offer to other shareholders for an additional one- fifth of the equity?
The answer is: intellectual property.
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