VISUALSOFT TECHNOLOGIES: Dot-com Baggage Is Hurting

The harsh reality of technology slowdown has started to hurt. Having

experienced one of the longest boom times known in history, Indian software

companies are struggling to come to face with the reality. Four companies have

issued profit warnings blaming the slowdown of the US economy, with more slated

to come in the next couple of weeks. The sad part of the slowdown is that in all

probability the companies, which were the most profitable thanks to the dot-com

boom, will be the ones that will be the hardest hit.

Among the companies that have announced a profit warning is Hyderabad-based

VisualSoft Technologies, perhaps the only successful products and services

company. One of the most dynamic of the listed IT companies, VisualSoft

Technologies is now going through a process of redefining its business model, to

ensure it sustains the cent percent growth it has been achieving in the past.

Background: Impressive start

VisualSoft India was formed in December 1995 by DVS Raju, ex-promoter and ex-JMD

of Satyam Computer Services (Satyam). Raju headed the marketing division of

Satyam and resigned in 1992. He worked as a consultant for the next four years

and finally set up VisualSoft India in 1995. Raju has over 16 years of

experience in the software area with stints at Danlaw Inc., USA as well as

teaching assignments at REC Trichy and Ohio University.

To speed up the growth of the company, VisualSoft entered the capital markets

in October 1996 and managed to get subscribed in what was one of the worst times

for the capital markets. The company raised Rs 3.15 crore from the market, which

was used to fund its Rs 6.75 crore project to set up a 5000-Sq ft software

development facility at Hyderabad.

Future: Fears of the slowdown

VisualSoft

has issued a profit warning stating that its products sales would see negative

sequential grow-th in the Q4 ended March 2001 following the slowdown in the US.

Notably, out of the total revenues from products segment, the company achieves

almost 50% from a single product.

While all the listed technology stocks have taken a beating in the past

couple of months, we feel that VisualSoft’s inherent strength in high-end

technologies would make it one of the earliest gainers in a market revival.

Hold.

Sushanto Mitra is the founder

of Technology Capital Partners



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