BizArticZ!

SECOND COMING!

Infosys is going back to the future. Co-founder N.R. Narayana
Murthy is coming out of retirement to take the helm of the Indian software outsourcing
company. His return is a sign of the depth of the malaise at the
former poster child of the industry.
The 66-year-old entrepreneur,who was Infosys chief executive for 19 years, is returning as
executive chairman for five years.
In what could be a signal of future leadership transition,
Murthy's computer scientist son is coming on board as executive assistant.
Infosys has lost its halo in the two years that Murthy has been
away. Its shares fell 22 percent on April 12, when Infosys
warned that revenue growth will
be just 6 to 10 per cent in the financial year that began on April 1. That makes the company a
laggard in an industry expected to expand by as much as 14 percent.
Margins are under pressure:earnings before interest and
taxes fell to under 26 per cent of revenue in the last financial year,
down from 29 per cent in the previous 12 months. One culprit is pricing. Unlike rivals HCL Technologies and Wipro, Infosys is struggling to get paid more by its clients for the work it does at
its offshore locations. Making matters worse, productivity gains are falling short of the pay increases that Infosys is being
forced to shell out to its 157,000 employees to keep them from
jumping ship. The company's strategy of granting some of its
other founders a spell as CEO has also interfered with decisive leadership.
Infosys wants to transform itself
into a higher-margin technology consulting powerhouse, but has
had little success so far.
Acquisitions could help, but in order to have an impact they will need to be bigger than Lodestone, the Swiss business advisory firm Infosys bought in October last year for $349 million.
There is no resource constraint.
Indeed, Infosys has too much cash. The company's war chest is 236 billion rupees ($4.1 billion),equivalent to 17 per cent of its
market value. Infosys shares jumped almost 9 per cent on news of Murthy's return. One
practical way to reward that confidence would be to return some cash to shareholders while
Infosys ponders a new growth strategy.