Digital Equipment third-quarter net nearly triples

BANGALORE: Software services firm Digital Equipment (India) Ltd. on Thursday

reported its net profit nearly tripled in the October-December quarter, driven

by new orders from the Internet and telecommunications sectors.

The company, which is 51 per cent owned by US-based Compaq Computer Corp,

said that third-quarter net profit rose 188 per cent to Rs 165.8 million ($3.57

million) from Rs 57.5 million a year ago. Earnings per share rose to Rs 5.07

from Rs 1.76.

Net sales jumped 149 per cent to Rs 526.3 million from Rs 211.1 million a

year earlier.

Digital's profit was expected to increase by analysts, whose forecasts varied

widely from Rs 120 million to Rs 180 million rupees. Chetan Shah, analyst at DBS

Securities, said the sales growth was in line with his expectations, but the

bottomline exceeded his forecast.

"It looks like margins have improved on the back of better utilization

and an improvement in billing rates."

DBS Securities had forecast a net profit of Rs 122.7 million on net sales of

Rs 515.2 million.

In the July-September quarter, net profit had risen 78.2 per cent from the

year-earlier period.

At the Bombay Stock Exchange, Digital India shares on Thursday closed up 2.2

per cent or Rs 11.55 at Rs 530.5 ahead of the earnings results, which were

released after the close of trading.

During the past six months, Digital India shares have fallen about 9.7 per

cent.

Driven by services



Digital India said in a statement that it had diversified into new technology
areas in the past quarter, boosting growth.

Revenue from software services also increased, due largely to fees from

helping traditional businesses set-up Internet arms and from the

telecommunications sector.

"We have made substantial progress in new business development across

all regions, both with Compaq and independent clients," Digital chief

executive Som Mittal said in the statement. Digital, which exited the computer

hardware business and domestic market in June 1999, derives 87 per cent of its

revenue from its parent firm, Compaq.

The statement said that revenue from Compaq had grown 26 per cent to Rs 459

million during the third quarter while revenues from other clients increased 66

per cent to Rs 67 million.

Digital counts among its other clients networking giant Nortel Networks Corp,

Sony Corp, the world's second-largest consumer electronics maker, and NEC Corp,

the second-largest Japanese computer maker.

Digital chairman Jeff Lynn said that the current slowdown in the US economy

may actually enhance the competitive positioning of the Indian offshore delivery

model. That refers to Indian companies developing software at low cost at home

and selling it in lucrative Western markets. ($1=46.41 rupees).

(C) Reuters Limited 2001.