Intel Capital to step up exposure

Sasken Technologies, Tejas Networks turn more promising as telecom spending goes up

Intel Capital, the venture capital arm of the chip major Intel, is increasing its stake in Sasken Technologies and Tejas Networks.

Intel has been upbeat on the Indian telecom software story and this is a further indication that the sector holds much promise in its perception in the coming years.

The sharp telecom focus of the two companies and the renewed rise in global telecom spending should earn Intel rich dividends in future.

Sasken Technologies confirmed that Intel has indeed increased its stake in the company during the first quarter of the current fiscal. The company, however, declined to reveal the investment figures.

Tejas Networks declined to comment on this fresh funding but said that Intel had invested in the company during its second round of funding worth $9 million in January, 2002. It was led by IL&FS Venture Capital.

While Sasken is a provider of telecommunication software solutions and services to terminal equipment manufacturers, network equipment vendors, semiconductor companies and network operators around the world, Tejas is focused optical networking products.

Sasken for the year-ended 2003-04 saw its revenues surge from Rs 109 crore to Rs 166 crore "" a growth of 52 per cent in rupee terms and from $22.6 million to $36.4 million, a growth of 61 per cent in dollar terms. Services revenue grew at 92 per cent, contributing 76 per cent of the revenues, while its IPR related revenues contributed 24 per cent to the total.

Sasken's onsite-offshore revenue ratio for the year was 36:64 and its revenue per person stood at $32,810. It is against this strong backdrop that the company has committed to go public during the current fiscal.

Intel has been fairly aggressive in the Indian market investing in companies such as Subex, FutureSoft and Deccanet and has been playing its exit cards well. Recently, FurtureSoft was acquired by Flextronics, the $14 billion contract manufacturing major. It is also likely that Intel will exit Deccanet in the same fashion.

Industry analysts tracking this space indicate that if Flextronics is looking at increasing its telecom software presence in the Indian market, it is logical for it to engage these companies in their endeavour. Sasken, however, said that it is not in talks with Flextronics and is committed to its vision of being India's premier communications technologies company.

In addition to divesting equity to Intel for a second time, Sasken has an ongoing business relationship with Intel in the protocol stacks space.

Sasken's profits grew from Rs 1.27 crore to Rs 18.33 crore during FY04 and the company was "vigilant with new capital investments, restricting them to Rs 10 crore". The company currently employs close to 2,000 professionals and this is expected to go up to 3,000 in a short period.

On the other hand, Tejas has developed software-differentiated, next-generation products that enable telecommunication carriers to build converged networks that support traditional voice-based services as well as the new data-dominated services like network design, system integration, commissioning, operations and subsequent maintenance.

Tejas has also entered into strategic partnerships with leading equipment vendors of optical switching.

It is also offering its own IP for end-to-end solution to its customers.

Besides Intel, the company has investors like Gururaj Deshpande, Sycamore Networks, ASG Omni and IL&FS Venture Capital and has so far received a total funding of $14 million in its two rounds of funding.