Flextronics Software Systems' profit jumps 40%

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Flextronics Software Systems (FSS) on May 5 reported a 40 percent jump in profit after tax at Rs 1082 million (Rs. 108.2 crore) for the fiscal year 2004-05. The company's sales during the year grew 33 percent at Rs 4,761 milion (Rs. 476.1 crore).

However, the company's subsidiary, Tenet Technology, appears to have posted a loss, as the profit after tax of FSS along with its subsidiary was Rs 1078 milion (Rs 107.8 crore), during the year under review.

It was not a very significant year for its BPO business as only 4 percent of the total revenue came from this segment.

The fourth quarter of the fiscal year 2004-05 saw FSS' profit after tax grow 42 percent at Rs 301 million (Rs 30.1 crore). Sales went up 29 percent at Rs 1,295 milion (Rs 129.5 crore) over the year-ago quarter. The company added 12 new customers during the quarter under review. 83 percent of the revenue during Q4 came from services, while revenue from products stood at 13 percent. 68 percent of the firm's revenue came from its top 5 clients.

Commenting on the results, FSS president and managing director Arun Kumar said he was pleased with the company's "11 straight quarters of predictable performance. We have reported a 33 percent topline growth."

Asked about the proposal made by the parent company, Flextronics International Ltd, to buy out the remaining holding in FSS, Kumar said "The Board of Directors considered the letter sent by Flextronics. They feel the shareholders should consider the offer, and it is for them to decide."

He said FSS would call an EGM in accordance with the SEBI regulations in this regard.

Kumar, however, declined to comment on the statement made by majority shareholder, which said "if we find that the ultimate terms of this proposal are not acceptable to Flextronics, we will examine alternative strategies for our Indian operations."

Flextronics International, the Nasdaq-listed company, which holds 69.7 percent in the Indian unit, is ready to pay Rs 575 a share for the remaining stock.

Asked as to why the company's BPO business had not grown significantly, Kumar said "We are not happy with the overall performance of the BPO business. I would expect the growth to be lower. But are we satisfied. No we are not."