Background
The Rs 210 crore Delhi-based Hughes Software Systems Limited is a global leader focused on convergent solutions through its products and services for the fixed and mobile networks for both voice and data.
It supplies a broad range of communications-related software services, products, and solutions to leading telecommunication companies and application developers around the wo-rld. The companies using solutions from HSS include Alcatel, ADC, Cisco, Ericsson, Lucent, Nokia, Huawei, Sylantron Sha-nghai Bell, SK telecom etc.
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HSS has been developing the communications software solutions for a large number of HNS projects. Recently, HSS annou-nced its entry into broadband communications app-lications with a new contract to provide specialised engineering services for the HNS Spaceway programme.
It is the next generation broadband satellite platform that will provide affordable, full-mesh connectivity for the delivery of high-bandwidth multimedia services. The first system is scheduled to begin operation in north America by 2003.
HSS commenced its operations in December 1991 and came out with a public offering at Rs 630 per share in October 1999. It currently has a staff strength of 1,600 employee with offices in US, UK, Germany, Finland and India.
The parent
Hughes Software Systems (HSS) is a subsidiary of Hughes Network Systems (HNS), a unit of Hughes Electronics Corporation. With annual revenues of $1.4 bn, the US-based HNS is the world's largest broadband satellite network solutions provider. It has over 4,00,000 systems installed in more than 85 countries.
HNS pioneered the development of high-speed satellite Internet access services, which it markets globally under the DirecPC and DirecWAYTM brands and is a major supplier of mobile satellite networks and user terminals. HNS is also a leading manufacturer of satellite television receivers.
It's affiliate companies in India include Hughes Software Systems, a publicly traded software development subsidiary; Hughes Escorts Communications Ltd (HECL), a provider of shared-hub satellite communications services; and Hughes Tele.com, a telecommunications operator in Maharashtra telecom circle.
Echostar Communi-cations, an US-based communications company, has recently made a bid to acquire Hughes Electronics to become the largest satellite television provider in the US. The approval of the proposed acquisition would lead to a management change in the company. This could result in an open offer for HSS shareholders. However, the company's management does not believe that the events will lead to an open offer for its shareholders.
Performance
Given the advantage of a strong parentage, the company has emerged as one of the leading software services companies in India. Moreover, until the setback in the last quarter ended September 2001, HSS had maintained a healthy operating margin and return on capital employed in excess of 40 per cent and 35 per cent respectively.
For the half-year ended September 2001, net sales grew by 44 per cent to Rs 124 crore from Rs 86 crore in the corresponding period last year. Net profits also increased by 12 per cent to Rs 25 crore from Rs 22.4 crore in the first half of FY02.
However, the performance in the second quarter ended September 2001 was hit by the unexpected decline in revenues from the product division. The revenues from the product division declined to Rs 7 crore as compared to Rs 18 crore in the previous quarter. This slowdown in revenues from the high-margin products division led to a decline of 52 per cent in HSS' net profits despite a 20 per cent revenue jump to Rs 57.4 crore.
Future plans
Hughes Software Systems is focused on providing convergent solutions for the fixed and mobile networks for both voice and data. Recently, the company announced its intention to expand its portfolio which concentrates on meeting communication OEM requirements to include systems integrators and service providers as well.
HSS is also diversifying its business into a new segment in the communications space by concentrating on building broadband communications applications for the service provider segment. This would also include offerings in the network Operating Systems and Support (OSS) space.]