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Wipro: At Crossroads

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DQI Bureau
New Update

Wipro’s

grand metamorphosis from a vegetable oil company to an IT giant is history now.

All along, there have been many firsts for Chairman Azim Hasham Premji and

Wipro, the last fiscal being no exception. Premji became the richest Indian,

and, for a short period, the second richest man in the world. Wipro was no less

fortunate, commanding the largest market capitalization. And together, Premji

and Wipro became synonymous with India Inc.

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Wipro has realigned and recreated its IT divisions, by

merging and consolidating its line of business. The company has always had a

restructuring saga and in the last four years it had close to five

reorganizations. Today, Wipro’s hardware business is with Wipro Infotech,

under the control of Arun Thiagarajan. Its software business, under Wipro

Technologies–the bedrock of the company’s revenues–rests on the shoulders

of its Santa Clara-based chief, Vivek Paul.

To begin with, let us take stock of what transpired at Wipro

during the 1999-2000 fiscal. The company lost one of the most successful and

most admired CEOs of corporate India, Ashok Soota, who left Wipro to start his

own venture. And the entrepreneurial bug did not bite Soota alone–a host of

other senior professionals left the company to start their own ventures. Despite

that, Premji in his impeccable style, went ahead with his plans and roped in

Vivek Paul from General Electric, to take Soota’s place on the company’s

board. Wipro has been following the policy of manning itself with professional

managers, ever since its inception.

Domestic business has been Wipro’s weak front, and with the

joint ventures (JVs) falling through over the years, the PC market has become

another gray area for an otherwise strong company. But the break-up with Acer,

to a large extent, did some good to the company. Wipro was able to push up the

number of PCs, and sell close to 50,000 boxes in the last fiscal. It also came

out with a range of PCs, including home PCs, workstations and servers. Somehow,

Wipro has been a company unable to strive through JVs.

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Despite Wipro Technologies being the major revenue garner,

the company has never let go of its hardware business. The philosophy behind

this is that the combination of hardware with services and solutions that the

company provides, gives it a better access to the domestic market. Particularly

in the PC business, Wipro hopes to cash upon its brand name and make a big entry

into the home segment. A recent survey by DATAQUEST showed that Wipro was the

most prolific PC brand, with a share of 32% among the branded PC vendors.

The bedrock of the company has always been its services, and

the year that passed too saw Wipro Technologies improving on this front since

the preceding year. By positioning its CEO in the US, Wipro hopes to reach out

to the market and its customers, and keep in tune with the changing trends in

technology. As for the last year, Wipro Technologies continued to grow along

with the industry. The results were on expected lines and there was nothing

dramatic to write about.

Interestingly, against all anticipations of analysts and

market watchers, Premji has desisted from hiving off Wipro’s software arm into

a separate company. The recent spate of advertisements, in the wake of its plans

to get a US listing, also tries to convey the message that Wipro is a one-stop

shop for the entire home needs. Wipro, in all probability, will go for a New

York Stock Exchange listing.

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Another interesting fact that comes out is the holding

pattern in Wipro. Premji continues to hold 75% of Wipro stocks, and this is

another demand that he has not conceded–diluting his shares. And with just 15%

of Wipro shares floating in the market, the low liquidity of the company is one

of the reasons that Wipro stock has always been on the higher side. The stock

split of 5:1, by which Wipro brought down its par value to Rs 2, has also not

helped the liquidity of its stocks. And in its entirety, this shows why the

company’s employee stock option plan (ESOP) is creating a lot of

disgruntlement among its employees.

The other significant area that Wipro will be getting into is

the ISP segment through Wipro Net. Though it commenced operations long ago, it

is only in this fiscal that it has plans to make a major breakthrough into the

market. Wipro Net will be concentrating its efforts on corporates and a part of

it will also be catering to the business-to-business (B2B) segment through its

portal.

Wipro has always bet on its brand, value system and the

passion for quality. As part of restructuring its brand image, it came out with

the vibrant Rainbow Flower logo, with a positioning statement ‘Applying

thought, day after day,’ last year. Now, after achieving Carnegie Mellon

University’s Software Engineering Institute’s Capability Maturity Model (SEI-CMM)

Level 5, Wipro is targeting to attain the Six Sigma by 2002. The Six Sigma

initiative across the company also helped it reap a benefit of Rs 16.2 crore in

the last fiscal.

Wipro’s avowed aim is to establish itself as a global brand from India. If

it has to achieve this aim, some compromises and concessions will have to be

made, be it spinning off its software division or diluting Premji’s stake.

Such measures will not only increase Wipro’s liquidity, but also emblazon it

with a better ESOP. DQ

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