Offshore IT services vendor Wipro Technologies is making its largest acquisition to date, paying E47 million ($56 million) in cash for semiconductor design company NewLogic Technologies. This move should enhance Wipro’s system-on-chip and R&D services, enabling the company to continue its expansion into higher-margin arenas.
Wipro Technologies has signed an agreement to acquire NewLogic Technologies.
Privately-owned NewLogic is based in Austria and designs and develops semiconductors for use in the communications, automotive, and consumer electronics sectors. The company has developed proprietary technology for semiconductors supporting wireless networking applications such as wireless LANs and BlueTooth, and its client roster includes IBM, Motorola, Philips, and Infineon Technologies. The company expects revenue of E14 million ($16.8 million) for full-year 2005.
Wipro said the deal enhances its ability to provide system-on-chip design services through which it can integrate all components of a computer system, including analog, digital, and radio frequency functions, on a single chip.
The NewLogic deal will be Wipro’s largest takeover to date. The company paid $18.7 million in cash for financial services consulting firm NerveWire in April 2003, and snapped up the global energy practice of American Management Systems for $26 million in cash in November 2002. The $56 million price tag for NewLogic includes a cash payment on closure of the transaction, plus a three-year earn out.
Wipro, like its domestic peers Tata Consultancy Services, Infosys Technologies, and Satyam Computer Services, is moving away from its traditional revenue stream of applications maintenance services as it becomes increasingly commoditized, and is expanding into higher-margin areas such as consulting, BPO, and R&D services.
Wipro claims to be the largest third-party R&D services provider in the world, and will roll NewLogic together with its existing semiconductor R&D team to create a new division called the Product Engineering Solutions Group.
The move by Wipro is a further sign that India’s major software services vendors are becoming increasingly aggressive in their M&A activity, albeit through purchasing mid-sized target companies with specific vertical or horizontal skills.