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India's Sasken Goes Finnish

Light Reading
News Analysis
Light Reading
7/26/2006

Bangalore, India-based Sasken Communication Technologies Ltd. , a mobile software and outsourcing services firm, has reached into Europe for its first overseas acquisition, buying Finnish company Botnia Hightech Oy for €35.5 million (US$45 million). (See Sasken Buys Botnia.)

Botnia provides R&D and testing services to wireless handset vendors, a focus that Sasken says will complement its portfolio that includes wireless embedded software, hardware and mechanical design services, and OSS software support. Sasken offers product development and testing services for network OEMs (original equipment manufacturers), semiconductor vendors, and mobile device OEMs.

But its proximity to Northern Europe's heavy hitters in the handset and infrastructure equipment space -- the likes of Nokia Corp. (NYSE: NOK) and Ericsson AB (Nasdaq: ERIC) -- made Botnia a prime target, according to Sasken's chief operating officer, Prabhas Kumar.

Kumar says the offshore model for outsourcing services is evolving into a preference for companies with a global presence, local knowledge, and locations physically close to the customer -- known, unfortunately, as "near-shoring." With so many outsourcing providers competing for business, "the true differentiator is going to be not just cost, but proximity to customers," he says.

The deal with Botnia adds operations in Finland, Denmark, and Germany to Sasken's offices in India, China, Sweden, Germany, the U.K., Japan, Mexico, and the U.S. Sasken will open a development center for hardware and mechanical design in Finland.

So while Sasken is "always scanning the landscape" for acquisition targets, the near-shoring element is one of its three criteria for a potential purchase -- the other two being a complementary portfolio and the opportunity to deepen its relationship with Tier 1 customers.

"A particular acquisition could fill one or three of those," says Kumar, noting that Botnia ticks off all three, as it has a strong relationship with “a particular Tier 1 customer” from which Sasken is keen to increase its revenues.

Sasken has been growing organically -- for its fiscal first quarter ended June 30, it reported a 35 percent year-on-year growth in revenues and an 81 percent growth in net profit -- but Kumar says the company wants to "add to the momentum," through acquisitions. (See Sasken Reports Q1.)

In April, it acquired Integrated SoftTech Solutions (iSoftTech), a software and R&D services company based in Chennai, India, for $1.45 million.

— Nicole Willing, Reporter, Light Reading

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