Predatory offshore services vendor Wipro Technologies Ltd has stepped up its shopping spree with the 25m-euro ($32m) acquisition of Finnish mobile telecom software development firm Saraware Oy.
Saraware has 200 employees providing design and engineering services to telecom operators, with specific expertise in radio networks and secure mobile platforms. The company increased profit before interest, tax, depreciation and amortization by 50% to 2.7m euros ($3.4m) in full-year 2005, on revenue that grew 15% to 13.7m euros ($17.3m).
Privately owned Saraware, which has a development center inside the Arctic Circle, has worked with clients such as Finnish carrier Sonera to provide services including systems specification, implementation, testing and software configuration management.
Bangalore-based Wipro said that one of the main reasons behind the takeover was to ramp up its presence in the Nordic region, where it claimed that local vendors such as Nokia and Ericsson account for close to 50% of the global market for wireless infrastructure.
Wipro’s main competition in the wireless software development and R&D space comes from Finnish IT services company Tietoenator, which reinforced its position as Europe’s largest telecoms R&D services supplier through a major deal with Siemens in March 2006.
Ari Vanhanen, president of TietoEnator’s 5,000-strong Telecom & Media division, told Computer Business Review: We come up against Wipro Technologies and Satyam, as well as [Swedish vendor] Teleca. The European market is very fragmented and there are a lot of smaller companies, and the equipment manufacturers still have a lot of internal R&D expertise.
Wipro ramped up its R&D capabilities last December through the 47m euro ($56m) acquisition of Austrian semiconductor design company NewLogic, which has developed proprietary technology for semiconductors supporting wireless networking applications such as wireless LANs and BlueTooth for clients including IBM, Motorola and Philips. Wipro claims to be the largest third provider of third-party R&D services in the world.
Following the payment method it used on other recent takeovers, Wipro will pay an initial cash sum for Saraware, take on some of the target company’s debt, and pay an additional earn-out if it meets specific financial goals over the next 18 months. The acquisition is expected to close in the next month.
Saraware is Wipro’s sixth acquisition in the space of just six months. It paid an undisclosed sum earlier in June for Michigan-based CAD services firm Quantech, and snapped up Californian consulting firm cMango Inc for $20m in February. Last December, Wipro bought the aforementioned NewLogic and payment services firm Mpower Inc for $28m, and just days before the Saraware deal acquired Portuguese retail experts Enabler for $53m.
Wipro has been the most aggressive of all of India’s major IT services providers in terms of M&A activity, which have taken a conservative approach to investing their consistently high profits into overseas takeovers.