Today in Tech: HCL Tech hits 12 year high; Impact of presidential elections; Microsoft Surface pricing

NS Ramnath
Updated: Oct 17, 2012 12:25:09 PM UTC

HCL Tech hits 12 year high HCL Technologies better than expected first quarter results is yet another indicator that its strategy - of targetting large contracts coming up for renewal offering better pricing to the customers - continues to serve the company well as it seeks faster growth. Its revenues were up 31% year on year, and net profit up 78%. Its shares have hit a 12 year high. The expectations from IT sector in general were a little muted after Infosys guidance last week. HCL Tech results show that companies are carving out different paths. Even in a weak market, some can grow fast. But, the real surprise in HCL Tech is not so much in its revenue growth as its ability to improve margins. Its EBITDA margins rose from 17.1% a year ago to 22.2% now. It's lower much lower than Infosys, which suggests there's scope for improvement. The big question is whether it can continue to do so.


Impact of presidential elections
The big takeaway from IBM's results is that customers in US are still unwilling to spend big on IT. Bloomberg reports that the economic slowdown in North America caused "software deals to be pushed back and kept customers from signing up for business technology services packages." “We thought we had those through the end of the quarter,” the newswire reporterd Chief Financial Officer Mark Loughridge telling investors. A Reuters report says this could be a result of the presidential elections. The customers are going ahead only with smaller purchases instead of replacing entire systems, an equity analyst told Reuters.

While you are on the subject of US elections, check out this recent note by Everest group which argues that political rhetoric on offshoring as irrelevant - mainly because the US government is more worried about manufacturing jobs and that there is a shortage of IT talent in US.


Surface pricing
Given how the Nokia Lumia was priced, it came as no surprise that Microsoft Surface prices will start at $499, closer to Apple which is already well established in the market than what you would expect from a new comer hoping to take some share. I can only think of one reason why it might make sense. If Windows 8 becomes a hit and gets to run the primary devices (laptop/desktop), there is a chance that users might want a compatible system running their other devices (phone and tablet). They might be willing to pay the premium that Microsoft seems to demand. Everything depends on Windows 8.


The thoughts and opinions shared here are of the author.

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