Hexaware to cut pay, bench 350

In a bid to control costs and further improve current utilisation, IT major, Hexaware Technologies [Get Quote], will soon introduce a salary reduction for employees above certain levels and also put 350 personnel, currently non-billable, on to a 'virtual bench.'

These steps have been taken in view of the current global macro-economic scenario, the company said in a press release issued on Wednesday.

The 350 personnel who will be put on to a 'virtual bench' will be retained in the organisation and given time-off to improve their skills and get re-trained in skills which are in demand, the company said.

"Hexaware will also organise re-skilling and training opportunities for these employees and will give them a compensation equivalent to 50 per cent of their basic salary," the release said.

These employees will continue to be on the pay-roll of the company and their service continuity would be protected, it said, adding they will continue to receive retirals and hospitalisation insurance and life-cover from the company.

A salary reduction between 2-10 per cent for employees above certain levels will be introduced, effective April.

The salary of employees at the entry-level to employees with around three years of off-shore experience will not be impacted while the senior-most employees will be subject to a higher per centage cut, the company said.

"As a result, the salaries of 40 per cent of the total employees will be unaffected. The implementation of this step will enable the company to further rationalise costs," the release said.

"While we strengthen our competencies and continue to work towards building a stronger revenue-stream, given the current market environment, we are also maintaining a significant focus on improving operational efficiencies, enhancing productivity, increasing utilisation and implementing multiple cost rationalisation initiatives," Hexaware's CEO and vice chairman, P R Chandrasekar, added.

IBM leads race for Satyam buy

Global IT giant IBM is understood to be the front-runner to acquire Satyam Computer Solutions, a company it named as one of its main competitors in a filing to the New York Stock Exchange in February.

The US major, said sources close to the developments, has begun discussions with Satyam's government-nominated board and expressed its desire to acquire a majority stake in the company. A team of investment bankers and lawyers from the US and Europe has been brought in to assess the size of the deal and the risks associated with it. The company is also understood to have conducted an initial due diligence on some of Satyam's major customers.

A week ago, Minister of Corporate Affairs P C Gupta said the open bids would not be restricted to Indian players. IBM was named one of the hostile bidders for Satyam by promoter Ramalinga Raju at the company’s December 16 board meeting.

Other prominent players in the race are Larsen & Toubro (L&T), which owns 12 per cent in Satyam, and the B K Modi- owned Spice group.

The government-nominated board is expected to invite bids for a 31 per cent stake in the company, but is likely to assure the successful bidder 51 per cent even if it fails to get the additional mandatory 20 per cent from the open offer.

When contacted, a company spokesperson said: "IBM does not comment on rumours and speculation."

If IBM wins the race to acquire Satyam, it will become the largest IT services player in India, with a combined employee strength of over 125,000 people (more than current leader Tata Consultancy Services).

Analysts said IBM will benefit significantly by acquiring Satyam because the Hyderabad-based company has a low-cost structure that can give IBM the leverage to compete with Indian IT service providers.

“Larger companies have better merger and acquisition (M&A) experience, strong client relationships, and a very strong understanding of the IT business,” said Sudin Apte, senior analyst, Forrester.

Meanwhile, the minimum net worth for the bidders is expected to be upward of Rs 2,000 crore. The bid-pack, said sources, will be given to potential suitors once the government and the regulators clear the document.

Australia on the brink of recession after GDP contracts

AUSTRALIA is on the brink of its first recession in almost two decades after the economy shrank in the December quarter.

"It¿s clear to me that Australia is already in recession." NAB economist Rob Henderson. Photo: AAP.

Only the performance of the agriculture sector spared Australia a technical recession, defined as two consecutive quarters of economic contraction.

The figures released by the Australian Bureau of Statistics today showed the non-farm sector of the economy shrunk in both the September and December quarters.

Prime Minister Kevin Rudd gave a strong indication Australia would drift into recession, saying that recent data showed the nation "cannot continue to swim against the global economic tide".

“Australia can reduce the impact, cushion the impact of the global economic tide but we cannot stop it altogether,” Mr Rudd told reporters in Gladstone, Queensland.

Total gross domestic product declined 0.5 per cent in the December quarter, compared with growth of 0.1 per cent in the September quarter. It was the first time the economy had contracted in a quarter in eight years.

The economy grew at an anaemic 0.3 per cent over the year.

The stock market slide to its lowest intraday level in five years and the Australian dollar slumped more than 1 per cent to below US63 cents as investors priced in a greater chance the Reserve Bank will cut interest rates next month. Yesterday, the RBA left rates unchanged.

NAB Capital chief economist Rob Henderson said the “dreadful” GDP figures showed the Australian economy was already in recession, even though there hadn’t been two consecutive quarters of contraction.

“Half a per cent down after 0.1 per cent growth in the previous quarter … is an extended period of weak growth,” said Mr Henderson.

“By the US definition we would have a recession so it’s clear to me that Australia is already in recession.

“I don’t think it will get much better until the fourth quarter.”

A senior Reserve Bank official warned today the Australian economy won't avoid pain in 2009 but it was in better sharp than most other countries.

"Australia came into this period with better momentum than most, and with more scope than most to take expansionary policy measures,” Malcolm Edey, an RBA assistant governor, told a conference before the GDP figures were released.

“That scope is being used.”

UBS chief economist Scott Haslem said he expected the economy to contract further over the next two quarters, despite the massive stimulus from the Rudd Government’s $20 billion in cash handouts and five successive interest rate cuts.

The national accounts figures show household savings soared in the fourth quarter, reaching the highest level since the 1980s, said Mr Haslem.

Household savings rate rose to 8.5 per cent from 3.4 per cent, suggesting 80 per cent of the Rudd Government’s $8.7 billion handout in December had been saved, he said.

“Things are going to get worse on the GDP front. Today’s result will see significant downward revisions to 2009 growth estimates by consensus as the fourth quarter sets the base for 2009,” said Mr Haslem.

Westpac senior economist Anthony Thompson said the rise in household savings showed consumers had banked the extra money from the federal Government and rate cuts.

“While the rate cuts and handouts have improved their position now, they are very worried about the future and their job security,” said Mr Thompson.

Federal Treasurer Wayne Swan said the negative growth had been “inevitable” and was a “sobering reflection of the extremely difficult global environment in which Australia’s economy is operating”.

Before the figures were released, economists had estimated the economy grew by 0.2 per cent from the third quarter, according to the median forecast of 23 economists surveyed by Bloomberg.

Annual economic growth was forecast at 1.2 per cent compared with 1.9 per cent in the September quarter.

Economists had revised their forecasts at least twice in the past few days in the wake of conflicting data on company profits and inventories, trade and retail sales.

On Monday, worse-than-expected company profits and inventories in the fourth quarter sent some economists scrambling for their erasers to change their forecasts to a contraction in GDP.

The next day, these same economists were forced to change their forecasts again after a record $4.1 billion trade surplus in the fourth quarter suggested Australia had managed to grow in the last three months of the year even as its major trading partners moved deeper into recession.

Despite the negative reading, Australia achieved one of the best economic performances in the world in the December quarter.

The US economy shrank by an annual 6.2 per cent, Japan contracted by an annualised 12.7 per cent and the UK fell 1.9 per cent from a year ago.

Only a handful of countries achieved any growth in the fourth quarter, such as India and Greece.

In recent weeks, the RBA has repeatedly highlighted the strength of the Australian economy and banking system compared with the rest of the world, and it was the main reason the central bank yesterday decided to keep interest rates steady at 3.25 per cent.

RBA governor Glenn Stevens said yesterday while economic conditions were clearly weak the recent policy actions taken by itself and the federal Government would support domestic demand in the period ahead.

Before the decision to keep rates steady, the RBA had cut rates by 400 basis points at five successive meetings in the most aggressive easing cycle in Australian history.

Economists said they still expected rates to fall to 2 per cent as early as the middle of the year although the RBA may hold rates steady for the next couple of meetings.

HP pay cuts not to affect ex-EDS employees

Technology giant Hewlett-Packard's move to slash employee compensation and benefits across geographies in lieu of job cuts will not affect an estimated 3,000-plus workforce of the erstwhile Electronic Data Systems Corp. The EDS employees had been moved to subsidiary MphasiS after the former was acquired and merged with HP last year.

However, a good number of EDS India employees who were transferred to HP India will not be so lucky, industry sources said. "The pay cuts at Hewlett-Packard worldwide will not be applicable to the MphasiS' employees, or former EDS employees now with MphasiS, even though the merger of MphasiS with HP-controlled EDS is long complete. But HP CEO Mark Hurd's plan to effect pay cuts between 2.5 per cent and 5 per cent will affect all EDS employees who were moved to HP," an industry source added.

HP employs around 60,000 people in India, including former employees of EDS, which it had acquired for $13.2 billion in May last year.

HP's ADM services division, which handled a large number of in-house projects for the company till the merger with EDS happened last year, has been strengthened considerably by the merger and subsequent knowledge exchange with EDS' consulting teams, sources said, adding that this has also lead to duplication of roles.

"The issue of duplication of roles in certain positions, like consultant and project lead, is something which HP is seriously reviewing. But no firm decision has been taken on how to tackle this at the employee level," a source said.

After missing its first quarter earnings expectations, HP had announced worldwide cuts in compensation and benefits at its earnings call on February 18. CEO Mark Hurd's salary is set to be reduced by 20 per cent, executive council members' base pay by 15 per cent, while other executives will be subject to a pay cut of 10 per cent, HP said in a letter to its employees. Most employees will see pay cuts between 2.5 per cent and 5 per cent, depending on their job levels.

HP's net profit for the first quarter to the end of January fell to $1.85 billion from $2.13 billion a year earlier. Revenues for the quarter posted the slowest growth of all time, rising 1 per cent to $28.8 billion.

HP has forecast a revenue decline of 2-5 per cent from $118.4 billion posted in fiscal 2008. For the current year, the company has cut its profit outlook from printers, personal computers and server divisions, on back of lower-than-expected sales posted in the first quarter, and expectations of cutbacks in tech spending on computer services and software.

AIG has $61.7 bln loss, new aid may not be last

Enlarge Photo The AIG Building is seen in Tokyo February 27, 2009. American International Group Inc posted... Slideshow: World in pictures: March 02 2009

Mon, Mar 2 09:34 PM

American International Group Inc posted a record $61.7 billion quarterly loss on Monday and got a new but not necessarily final government bailout after officials concluded again that letting the insurer fail would threaten the world financial system.

AIG will get access to up to $30 billion of new capital, after getting a commitment for $150 billion in aid last year that gave the government a stake of nearly 80 percent.

The latest bailout avoids for now any crippling credit rating downgrades that could force AIG to come up with billions of dollars it might not have.

The new rescue agreement increases the government's commitment to keeping AIG on life support.

The deal was announced just three days after the government announced a new bailout for Citigroup Inc, which like AIG has struggled to sell businesses and raise cash to pay back bailout funds. Both companies are based in New York.

The market is "a pretty crummy place" right now, AIG Chief Executive Edward Liddy lamented on a conference call. He said fixing AIG could take "several years."

In agreeing to a new AIG bailout, the Treasury Department and the Federal Reserve cited AIG's operations in more than 130 countries, its role as an insurer for more than 100,000 entities including operations that employ more than 100 million Americans, and its more than 30 million U.S. policyholders.

The government also acknowledged that Monday's bailout might not be AIG's last. "Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high," the government said in a statement.

It said fixing the insurer "will take time and possibly further government support if markets do not stabilize and improve."

ANNUAL LOSS NEARS $100 BLN

The quarterly loss, AIG's fifth in a row, equaled $22.95 per share, and compared with a year-earlier loss of $5.29 billion, or $2.08 per share.

AIG's latest loss, a record for a U.S. company, equaled about $465,000 a minute.

For all of 2008, AIG lost $99.29 billion, wiping out profit dating back to the early 1990s.

The new bailout gives AIG more lenient terms on existing financing. It will convert some debt into a preferred equity stake for the government in two units, American International Assurance and American Life Insurance Co, which each have significant Asian operations.

AIG also announced plans to spin off part of its property-casualty business, to be renamed AIU Holdings.

The company said it believes it has adequate liquidity to keep operating for the next year.

In morning trading, AIG shares were up 7 cents at 49 cents. The cost of insuring AIG debt fell, suggesting that investors see a lower risk of default.

AIG TOO COMPLICATED, UNWIELDY

The government appointed Liddy, a former chief executive of Allstate Corp, to run AIG in September after losses from credit default swaps threatened to collapse the company.

AIG built this exposure earlier this decade, when Maurice "Hank" Greenberg and then Martin Sullivan ran the company.

On the conference call, Liddy said AIG had become "too complicated, unwieldy and opaque" to keep operating as a conglomerate, and plans over "several years" to break itself into separate businesses.

"We need no new cash right now" after the latest bailout, Liddy said. "Who knows what happens in the future, but when things improve our company and taxpayers will be well served."

Paula Rosput Reynolds, AIG's chief restructuring officer, said on the call that there had been significant interest from potential buyers of the company's International Lease Finance Corp aircraft leasing arm.

Major credit rating agencies affirmed AIG's ratings, which fall in the "single-A" category, a medium investment grade.

Moody's Investors Service analyst Bruce Ballentine said he expected the government "will provide incremental support as needed to ensure that AIG can meet its obligations through this period of severe economic recession and market turmoil."

(Additional reporting by Walden Siew in New York and Glenn Somerville in Washington)

Lilla Zuill and Jonathan Stempel

Satyam Woes Threaten SanDisk

Gadget maker SanDisk (NSDQ: SNDK) is warning investors that the trouble at scandal-plagued outsourcer Satyam has put its business operations at risk.

SanDisk outsourced a number of critical IT projects to Satyam, but now some of those projects are in trouble following Satyam's admission that its chairman falsified profits and other financial information as part of a scam that's been dubbed India's Enron.

Among other things, SanDisk's plan to implement a new enterprise resource planning system this year is in jeopardy.

"The design and implementation of the new ERP system could also take longer than anticipated and put further strain on our ability to run our business on the older, existing ERP system," SanDisk warned in a document filed last week with the Securities and Exchange Commission that I happened across.

"Our current system integrator, Satyam Computer Services Ltd., is experiencing financial difficulty which has resulted in some project delays and loss of productivity," SanDisk stated.

"If the system integrator were to lose key personnel, declare bankruptcy or otherwise be unable to perform at the level we expect, we would have to engage a new integrator, which would likely result in significant delays in our implementation and additional cost," SanDisk continued.

"Any design flaws or delays in the new ERP system or any distraction of our workforce from competing business requirements could harm our business or results of operations," according to SanDisk, indicating that the stakes are pretty high.

On Jan. 7, Satyam chairman Ramalinga Raju admitted falsifying the company's cash position by as much as $1 billion while overstating quarterly earnings and revenue by up to 28%. Satyam may also have faked employee numbers and other data. Raju tendered his resignation and has since been arrested and jailed.

Some customers have fled Satyam in light of the scandal. India's Economic Times reported that U.S. heavy equipment manufacturer Caterpillar may terminate its deal. Insurer State Farm has said it would seek an end to its outsourcing contract with the company.

Satyam is now facing lawsuits from shareholders who claim they were misled about the company's financial situation. For their part, SanDisk investors might be wondering how much due diligence the manufacturer performed on Satyam before inking an outsourcing deal that has now come back to bite it.

Horace Walpole

"The world is a tragedy to those who feel, but a comedy to those who think."

100,000 pros may return to India from US

As economic downturn continues to grip the United States, as many as 100,000 highly skilled Indians -- and as many Chinese -- may return home over next three to five years, which will boost the economies and competitiveness of both the emerging Asian nations.

The reverse immigration could end up as a big loss to the US, which has so far relied heavily on the immigrants to give it a technological edge over the rest of the world, according to a study conducted by Indian-American Vivek Wadhwa and released by the Ewing Marion Kauffman Foundation.

The majority of these Western-educated, skilled and talented young Indian and Chinese professionals are planning to start new ventures, says the report released on Monday.

Much before the American economic slowdown, a large number of these professionals had already begun returning home lured apparently by prospects of a better future back home.

It also indicates that placing limits on foreign workers in the US is not the answer to its rising unemployment rate and may undermine efforts to spur technological innovation.

"A substantial number of highly skilled immigrants have started returning to their home countries in recent years, draining a key source of brain power and innovation," said Robert Litan, vice president of Research and Policy at the Kauffman Foundation.

Based on a six month survey of 1,203 Indian and Chinese who went back home, the report finds though restrictive immigration policies caused some returnees to depart the US, the most significant factors in the decision to return home were career opportunities, family ties, and quality of life.

"There are no hard numbers available on how many have returned, but anecdotal evidence shows that this is in the tens of thousands," said Wadhwa, executive-in-residence for Pratt School of Engineering at Duke University.

Wadhwa is also a fellow at the Labour and Work life Programme at Harvard Law School and is a BusinessWeek columnist.

"With the economic downturn, my guess is that we'll have over 100,000 Indians and as many Chinese return home over the next 3-5 years. This flood of western educated and skilled talent will greatly boost the economies of India and China and strengthen their competitiveness," he said.

India is already becoming a global hub for R&D. This will allow it to branch into many new areas and will accelerate the trend, Wadhwa said.

The report reveals that family considerations are strong magnets pulling immigrants back to their home countries. Care for aging parents was considered by 89.4 per cent of Indians and 79.1 per cent of Chinese respondents to be much better in their home countries, says the 24-page report.

Lok Sabha polls to cost more than US presidential elections

At a staggering Rs 10,000 crore, the Lok Sabha polls this summer would cost more than what Barack Obama [Images] and others spent in the US presidential race. According to information available with the US Federal Election Commission, Obama and other candidates collectively spent close to US $ 1.8 billion (nearly Rs 8,000 crore) in the 2007-08 presidential elections. A survey conducted by Centre for Media Studies in India pegs the estimated amount to be spent on the Lok Sabha elections, which would determine the next government in the country, at about Rs 10,000 crore (US $ 2 billion). This does not include the cost of holding assembly polls in states like Andhra Pradesh and Orissa.

While the cost of US elections was spread over a year, India would see the massive spending in a matter of months. The estimated Rs 10,000 crore cost for the Lok Sabha elections includes about one-fourth or Rs 2,500 crore being spent through "unofficial money" or the cash to be paid to voters by the candidates, the CMS survey says. The latest presidential elections in the US has been billed as the most expensive ever, with cost doubling from the previous elections held in 2004. Similarly, the cost of general elections in India, according to CMS, is also set to more than double this year from about Rs 4,500 crore in last Lok Sabha polls and would be the highest in the history of the country.

According to the CMS study, the government spending would be about 20 per cent of the total expenses, including about Rs 1,300 crore by Election Commission and about Rs 700 crore to be spent by various central and state government agencies for purposes like photo identity cards, Electronic Voting Machines and polling booth. Various political parties are expected to spend about Rs 1,650 crore from their party funds, which would include about Rs 1,000 crore from the two main parties -- Congress and BJP alone.

In addition to spending by parties, candidates of the national parties are estimated to put in Rs 4,350 crore, while those from the regional parties are expected to spend another Rs 1,000 crore. As per the information available with the US Federal Election Commission, Obama topped the list of all Presidential candidates by spending over US $ 760 million --more than double the amount of about US $ 358 million spent by his Republican rival John McCain [Images]. Another Democrat presidential hopeful Hillary Clinton [Images] spent about USD 244 million. According to another set of estimates for the US elections compiled by Washington-based think-tank Center for Responsive Politics, the overall cost of the 2007-08 US federal elections was USD 5.3 billion, including about USD 2.4 billion on the presidential race.

While the US figures are higher than the USD two billion estimated by CMS to be spent during the Indian elections, the polls here would still be expensive in rupee terms. As the US dollar was considerably weaker against the Indian currency during 2007-08, the US $ 2.4 billion spent on the US presidential elections, which got over on November 4, would have translated into a little below Rs 10,000 crore. This was the first time when the cost of the US elections surpassed US $ one billion-mark, while in India it was above this level even in the last Lok Sabha elections in 2004. However, the rate of surge in election costs is almost similar in both the countries. The 2004 Lok Sabha elections had cost the country Rs 4,500 crore against about Rs 3,200 crore in 1998 and Rs 2,200 crores in the 1996 Lok Sabha elections. The US elections cost about US $ 880 million in 2004, while it was about US $ 525 million in 2000 -- the two polls won by George Bush [Images]. The 1996 elections, won by Bill Clinton [Images], had cost about US $ 425 million, while about US $ 330 million was spent on the 1992 elections, also won by him.

BlackBerry Bold too hot for Japanese to handle

Toronto, March 1 (IANS) The BlackBerry Bold smartphone that was recently launched in Japan is proving to be too hot to handle for the Japanese, literally.

Many users have reported that the keyboard of their Canadian smartphone overheated during re-charging just days after its launch in Japan. However, no case of fire was reported.

Reports here said the Japanese wireless network NTT DoCoMo, which provides it service through the BlackBerry Bold, and BlackBerry maker Research In Motion (RIM) have suspended the sale of the device in Japan since some 30 cases of overheating have come to light.

According to a statement issued by RIM, which is headquartered at Waterloo near Toronto, just one percent of the smartphones sold in Japan reportedly overheated during re-charging but their temperature remained within regulatory standards.

It said the cause of the problem has not been ascertained yet.

'Although RIM's analysis of the devices in question has allowed it to rule out a battery problem, the root cause remains under investigation,' the statement by the wireless giant said.

A secure device for e-messaging for corporate executives, BlackBerry has over 21 million users in about 150 countries.