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| The company focuses on building technologies and solutions for leading CAD/CAM/CAE/PDM vendors. It posted a (consolidated) revenue growth of 32 per cent at Rs 88 crore and a 33 per cent growth in net profit at Rs 17 crore for fiscal 2002-03.
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| For the current fiscal, it has issued a top and bottomline (profit before tax) guidance of "over 20 per cent." To achieve this target, the company plans to set up two new offshore development centres during the current fiscal. The Geometric share quotes at around Rs 413 on the BSE and trades at a price-earnings ratio of 12x.
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| Nitin Deshpande, chief operating officer, speaks about future prospects in the PLM arena, the company's strategy to enter the industrial user's market via its partnership programme and the progress of its new engineering services division.
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| Considering the competitive environment and pricing pressures, has there been an adverse effect on billing rates?
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| We are seeing slight pricing pressures due to the global economic slump, but since we are laser-focused at PLM and our services are well recognised in the industry, we've not had to respond with price cuts. Price negotiations have definitely started taking longer to close.
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| What is the company doing to beat the slowdown?
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| We are looking at improving the value of our services to our existing clients and increasing the portfolio of services for better outsourcing to help our clients combat recession. This has started to work for us quite well.
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| What are the entry barriers in the business you operate in? What stops the big firms from entering this area?
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| Geometric's unique differentiator in PLM is the development of innovative technologies. Two of our technologies are market leaders and there are a few more in the pipeline.
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| We also offer technology-based services, which erects a barrier to others in the business.
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| What drove up revenues in FY03?
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| The major focus for new revenues has been our partnership model for reaching out to industrial customers.
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| Of course, traditional operations, engineering and maintenance (OEM) business continues to be the mainstay and growth in that segment was also a significant contributor.
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| Why has Geometric chosen the partnership model for business development?
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| We want to be known as a solutions-focused company while our partner takes care of sales and marketing efforts. The partners would also have the knowledge of local culture and would customise our solutions to suit the end-user.
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| We would benefit by leveraging on customer relationship and the partner's infrastructure while being part of an enterprise-wide solution.
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| Our partner would also benefit due to the expansion of their offering to customers, enabling them to grow their relationship and business. We have IBM, EDS and HP India Software Operations (ISO) as our partners currently.
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| Have your engineering services operations progressed? What are the projections on this front?
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| Engineering services enable Geometric to offer "end-to-end" services in the PLM space. An engineering services group has been set up. Benchmarks/pilots have commenced, which should be a precursor to larger projects.
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| We have planned to locate this business in Bangalore. It also reduces our dependency on the PLM market by broadening our offering. We expect to break even in Q4 of the current year on this foray.
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| The share of revenues from US is down from 86 per cent in fiscal 2001-02 to 71 per cent last year. How do see changes in revenue profile across geographies?
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| As a conscious strategy, we have focused on increasing our share of business from Europe and Asia-Pacific regions.
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| As part of a de-risking strategy, we would work towards increasing the share of European business, though the share of US will continue to be dominant for some time to come.
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| The revenue from the geometry business unit seems to be on a downtrend. Is Dassault pushing Geometric for lower margins?
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| As we have stated earlier, as projects from Dassault and its subsidiaries got over in the geometry business unit, new projects have been started in 3D PLM.
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| However, the geometry business unit has focused on industrial customers and expects to capitalise on the significant knowledge base of Catia CAA platform and also on core geometry and CAE knowledge. The challenge is more from the fact that Catia V4 to V5 migration is going a little slow. As that migration picks up, we expect a significant share of that business to be captured.
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| What are the risks that the company faces?
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| Our niche focus on PLM means that our growth is dependent on growth in the PLM space. Another negative is that our customers belong to the auto, aerospace and consumer durables industries which are highly dependant on macroeconomic factors. Working through partners is also not without an element of risk.
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| The ever-changing market also makes it compulsory to sustain innovation and the product pipeline. Multinational companies have also been setting up IT development/maintenance operations directly in India.
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| Geometric had cash of about Rs 43 crore on a consolidated basis last year. What does the company intend to do with it?
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| Geometric is always on the lookout for inorganic growth and may use the same if any good opportunity presents itself in the future.
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| What could be the potential damage because of a strong rupee this year?
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| Geometric has forward covers for FY04 and, hence, does not foresee any loss from a weak dollar this year.
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| What cost control measures have you undertaken this year?
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| The relocation of business and marketing unit heads back to India from the US helped us control costs. We also signed better contracts with vendors, including transport and maintenance pacts.
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| Investment in video conferencing and, hence, reduction in inter-location travel and telephone costs also helped us reduce expenses. We also invested in voice-over Internet protocol (VoIP) solutions which helped us reduce our expenses on ISD calls.
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| What is the company's strategy to consolidate its share of the PLM market?
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| Our objective is to be the most cost-effective PLM services provider in the world. We have formulated a two-pronged strategy to achieve this goal.
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Firstly, we will focus on the PLM space
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